Month: April 2024

Committee members pushed back on issues including horse racetracks and how to structure a deal for the state’s 11 tribes.

There was no vote, and HF 2000 is currently sitting in the House Taxes Committee awaiting a vote there. But Stephenson, who is the chair of the Commerce Finance and Policy Committee, said he wanted to have an informational session about Minnesota wagering legislation with his committee as the bill moves forward.

Stephenson’s bill, which was carried over from last session, has been heavily amended, including doubling the tax rate and adding in daily fantasy sports regulation. Stephenson also brokered a deal between the state’s charitable gaming foundations and the tribes that is reflected in the latest version of the bill.

But Commerce Finance and Policy Committee members were vocal in their concerns about several issues, including the tracks and what legal wagering will look like on Indian lands. Stephenson made it clear that his bill does not – and will not – include allowing historical horse racing (HHR) at tracks.

HHR is a dealbreaker

“I just want to be clear that in no universe will a bill leave this committee with historical horse racing,” he responded during a line of questioning about how HHR could be considered a game of skill vs. chance.

“I’ve left a lot on the table (to discuss) and have given very few redlines, but this is one.”

Representative Ann Neu Brindley also called the $625,000 earmark for purses at the state’s two racetracks “pennies”.

Instead Stephenson’s bill would further expand the gaming monopoly enjoyed the state’s tribes, which have previously said they would not support a bill that allows the tracks to have sports betting.

In states where tribes have exclusivity, Indian Country traditionally won’t get behind any legislation that would chip away at that right.

While Stephenson over the last four years has massaged his proposal, the biggest sticking point likely remains how to mollify the horse tracks and allow the tribes to retain exclusivity.

Stephenson: Take sovereignty seriously

Another line of questioning from committee member Tim O’Driscoll involved asking if there was a way to level the playing field for tribes or to dictate how they would partner with commercial operators.

He voiced concern that smaller tribes would not benefit as much as the bigger tribes, and suggested that the state legislate revenue sharing among the tribes.

Stephenson shot down the idea, saying that unlike with brick-and-mortar gambling venues, location doesn’t matter. A tribe of any size could partner with an operator of any size, he said.

The best example of this comes from Michigan. When the state legalised online sports betting, the Bay Mills Indian Community, located 350 miles north of Detroit, partnered with DraftKings, the second biggest operator in the country.

Stephenson also said that he does not believe it is up to the legislature to determine how or with whom tribes will partner. They are sovereign nations entitled to make their own decisions, he added.

The bill is one of two moving through the legislature. On the senate side, a SF 3803 (previously 1949) has passed through two committees, but remains stalled in State and Local Government and Veterans.

The Minnesota legislative session is set to close 20 May and there is no crossover deadline.

Revenue in the 12 months to 31 December 2023 amounted to €364.0m (£311.3m/$390.5m), down 7.3% year-on-year. Intralot said this was primarily due to the discontinuation of its Malta licence. 

Intralot also posted increase in spending during the year. This, coupled with lower revenue, led to a drop in bottom-line net profit, although EBITDA was higher on a year-on-year basis.

Reflecting on the full year, chairman and CEO Sokratis Kokkalis was largely upbeat. He spoke about “steady growth” in operating profitability and also referenced the reduction in debt – with this falling 32.1% to €333.2m.

Lower debt, Kokkalis added, will now allow Intralot to seek new opportunities to support its future growth plans.

“2023 was a year of steady growth in operating profitability with strong cash flow and achievement of strategic goals of margin expansion, deleveraging and debt reduction,” Kokkalis said.

“Important milestones were the successful share capital increase and the completion of the plan for the full refinancing of our debt, placing the company on a solid ground to pursue significant business opportunities globally, leveraging its modern and competitive technology.”

B2C decline hits Intralot 

Breaking down revenue performance in 2023, the overall decline was driven by a fall in B2C revenue. B2C revenue from licensed operations also dropped 68.2% to €28.4m, accounting for 7.8% of all revenue.

Intralot said the expiration of its licence in Malta in early July 2022 was the main reason for the B2C decline, contributing to a €43.9m decline. 

The group also noted lower B2C revenue in Argentina, with this down €17.0m. This came following recent economic reforms in the country and the decision by the new government to devalue the peso by over 50% in the last month of 2023.

B2B growth fails to offset B2C decline

Intralot reported growth across its two B2B segments: management and technology and support services. However, this was not enough to offset the B2C decline, meaning total revenue was lower.

B2C management revenue increased 43.2% to €72.4m, driven by growth in Turkey. Intralot highlighted online gaming growth in the country, as well as success in the local sports betting market. Morocco and US revenue also edged up year-on-year.

As for technology and support services, this remains Intralot’s core segment with revenue up 4.1% to €263.3m. Intralot said this was helped by local market growth in Croatia, while it also noted a marginal increase in the US.

Revenue in other jurisdictions was also up 9.8%, triggered by its new contract with Taiwan’s Public Welfare Lottery, agreed in mid-2023. However, Intralot did note a slight drop in Australia revenue due to negative foreign exchange movement.

Americas remain key for Intralot

Continuing with this geographical breakdown, Intralot said the Americas remain its core source of revenue. During 2023, revenue in this region hit €210.3m, although this was 10.6% lower than in 2022.

Europe revenue was also down 6.0% to €116.1m for the year. However, revenue in other markets increased by 30.7% to €91.4m, helping to partially offset declines elsewhere. Intralot discounted €53.7m in cross-segment revenues, resulting in the €364.0m final total.

As for type of gambling, 53.4% of all total revenue in 2023 came from lottery games. Sports betting accounted for 20.5% and video lottery terminals 11.8%. A further 14.3% came from IT products and services.

Bottom line net profit down 7.6%

Looking at costs, operating expenses increased 14.3% to €114.1m in 2023. However, it was not all bad news in terms of spending, with costs lower in other areas.

This included depreciation and amortisation, down 3.1% to €67.9m, and interest and related expenses, which was 2.9% lower at €35.7m.

As such, pre-tax profit amounted to €33.6m, a 12.8% increase on the previous year. Intralot did not state how much tax it paid but did reveal net income after tax and minority interest (NIATMI) was 7.6% lower at €5.8m for the year.

However, it was not all bad news. EBITDA was 5.4% higher at €129.5m and earnings before interest and tax was up 19.3% at €61.6m.

Intralot slips to loss in Q4

As for the final quarter of the year, this did not make for great reading at Intralot. Revenue was 7.7% lower at €84.0m, mainly due to the economic changes in Argentina.

Operating costs were 27.2% higher at €37.6m, while depreciation and amortisation spend increased 18.8% to €19.4m. There was, however, a slight fall in interests and related costs to €7.7m.

This meant a pre-tax profit of €1.4m, some 86.1% less than in the previous year. Tax details were not made public, although Intralot said NIATMI for Q4 was 125.9% lower at €3.2m.

EBITDA was also down 18.3% to €28.4m in the quarter, while earnings before interest and tax dropped 50.7% to €9.1m.

Future prospects

Looking to how Intralot has started 2024, the group has been boosted in recent weeks by a series of contract announcements with existing partners.

Among these is a renewed deal with Malaysian gaming company Magnum Corporation. Agreed in March, this will extend the partnership past the 17-year mark. Other recent deals include an extension with Morocco’s La Marocaine des Jeux et des Sports. 

These follow deals struck during 2023, such as a new sports betting partnership with the British Columbia Lottery Corporation (BCLC). Kokkalis’s comments on pursuing “significant business opportunities” suggest more deals could be in the pipeline for Intralot.

As for other activity, Intralot recently completed the merger of its wholly owned subsidiary under the name ‘Betting Company Single Member S.A.’

However, there are questions about how the group reported receivables in the results. Receivables is a method of recognising revenue before a business actually generates the revenue.

When detailing receivables for 2023, Intralot noted an €18.5m increase, compared to €6.8m in the previous year. Trade and other short-term receivables were also higher at €119.9m, in comparison to €109.9m in 2022.

As for other financing, Intralot dealt with its capital concerns by paying off 5.250% senior notes due in September this year. This was achieved using a €130.0m bond issuance and €100.0m bond loan from a consortium of five Greek banks.

On the same day of the trading of bonds, Kokkalis purchased 400,000 common registered shares, plus another 420,000 the following day. This signals confidence in the future of the company.

Revenue was clear of $1.24bn in February last year. It was also 4.7% higher than $1.28bn in January this year – the strongest opening month to a calendar year in Nevada history.

Slots drew the most revenue at $827.6m for the month, an increase of 0.6% from 2023. Of this total, $536.6m came from multi-denomination slot games and $207.6m penny slot machines.

However, only multi-denomination slot games reported growth in February. Revenue was lower across all other game types within this segment. 

Baccarat was the highest area of growth during February. Revenue here was 75.5% higher at $180.1m. Blackjack revenue was also up 15.6% to $132.5m with craps revenue rising 22.0% to $44.7m.

Other areas of growth include Ultimate Texas Hold’em, where revenue edged up 4.4% to $18.0m, and pai gow poker 4.7% to $10.4m.

Sportsbook revenue rises as Nevada hosts Super Bowl

February also saw Nevada host this year’s Super Bowl. The NFL end-of-season showpiece took place at the Allegiant Stadium, with the Kansas City Chiefs running out 25-22 winners against the San Francisco 49ers.

Perhaps unsurprisingly, Nevada reported a 16.0% rise in sports pool revenue in February to $47.9m. Notably, however, American football only accounted for $12.0m of this.

This biggest money-making sport for operators was basketball, with revenue hitting $24.7m. A further $4.3m came from hockey betting and $7.7m other sports, although baseball betting generated a $929,000 loss. It was also noted that $23.8m of all sports pool revenue came from mobile wagering.

Strip revenue tops $800.0m in February

As for the Las Vegas Strip, revenue in February amounted to $800.7m, up 12.4% on a year-on-year basis.

Slots revenue for the month hit $381.0m, down 2.4%. As was the case on a state-wide level, multi-denomination slots were the only area to report growth, with revenue down across all other games types.

In contrast, table, counter and card games revenue climbed 30.3% to $419.7m. Highlights here included an 81.9% rise in baccarat revenue to $180.5m and a 20.8% hike in blackjack revenue to $107.8m. As for sports pool revenue, this was 9.9% higher at $24.7m in February. 

Sportsbooks are taxed at 15% of adjust gross revenue (AGR). According to the Virginia Lottery wagering revenue report, 11 operators finished the month with “net positive AGR”.

Mobile betting accounted for $540m of the total while bettors wagered a combined $4.9m at retail locations. Promotions and deductions continued to decrease. After one senator proposed a cap on allowing operators to write off deductions in 2023, Virginia’s governor, Glenn Youngkin, went a step further and included a 12-month sunset on promotional deductions in his budget.

In total, four new operators also went live in 2023 in Virginia: Bet365 on 31 January 2023; Betfred on 1 February 2023; Betr on 6 September 2023 and SuperBook on 19 October 2023.

Betr, SuperBook only operators that can deduct promos

Bet365 and Betfred have passed the end of their timeline for deducting promotions, leaving just Betr and SuperBook that can continue to do so. If no other operator launches in the state during 2024, no operators will be entitled to deduct promotional play.

Notably, ESPN BET (14 November 2023) and Fanatics Sportsbook (21 November 2023) reskinned existing platforms in 2023 and are therefore not entitled to the deduction. ESPN BET was previously Barstool Sportsbook and Fanatics Sportsbook was previously PointsBet.

Compared to January, handle in Virginia was down, as were AGR, hold and tax payments. In January, sportsbooks had an adjusted win percentage of 10.34% and paid the state $9.9m in taxes, according to Sports Handle’s revenue and tax database.

The lottery does not provide individual information about how each sportsbook or betting market performed in its betting revenue report.

The February reports are the last before North Carolina, the biggest to state to launch so far this year, joins the mix. Operators there went live in early March, just days before the start of the NCAA’s March Madness, the biggest betting event of the year in the US.

The move towards regulated casino in Thailand follows a vote on Thursday (28 March) at the nation’s 500-member house of representatives.

In Thursday’s vote, a total of 253 out of 257 lawmakers present voted to approve a proposal recommending the legalisation of casino in large entertainment complexes. The plan will now be forwarded to the cabinet for final approval.

Prime Minister Srettha Thavisin has thrown his full support behind the move, highlighting the net benefits that attracting foreign investment to Thailand will bring.

“The entertainment complexes will enhance the country’s tourism industry,” Srettha announced on X. “In the past, we have wasted enough time and opportunity. The government will reclaim the lost time and turn it into an economic opportunity for the country and its citizens.”

Most types of betting are currently illegal in Thailand, with a majority Buddhist and conservative society.

The opening of casinos, however, will be in line with its recent embrace of a more liberal landscape to revive its tourism industry following the pandemic.

What’s in Thailand’s proposal?

The study was commissioned by Thailand’s parliament in 2023. Its aim was to examine the net benefits from regulating casino in large entertainment complexes.

A regulated market is seen as a way of both generating tourism revenue but also combatting the prevalence of illegal gambling. Thailand also currently faces significant “leakage” from the local economy. As it stands, players regularly visit border casinos in neighbouring countries, such as Cambodia, Vietnam, Myanmar and Laos.

The study also estimates that Thailand can lift tourism revenue by close to $12bn. This will see casinos being integrated into entertainment complexes, or integrated resorts. The building of such destinations will also greatly contribute to regional revenues, as well as reducing unemployment.

The proposal also suggests a 17% tax on gross gaming revenue. This would make Thailand one of the lowest tax regimes in the region. Licence duration is also recommended to be an initial 20 years, which will be renewable every five years.

Finally, larger casino complexes will also be required to invest a minimum of $2.7bn in the country to receive approval.

Experts expect Thailand casino approval “within three years”

As has been covered previously in iGB, industry experts currently expect integrated resort (IR) approval within three years. The likes of MGM, Las Vegas Sands and Hard Rock Asia are all expected to be in the queue.

A previous parliamentary study of casinos released in January 2023 proposed up to five “entertainment complexes”. This would be similar to IRs in Singapore and Macau.

Primarily aiming to generate tax revenue, complexes would feature casinos, hotels, shopping, convention facilities and other amenities. Of course, this will depend on how Thailand seeks to regulate the market, as well as foreign gaming operators’ willingness to partner with Thai companies.

Commenting in an interview with iGB in September 2023, Bangkok-based Destination Capital CEO James Kaplan said Thailand will do “it”, but the question is what the “it” will look like.

In Kaplan’s view, the current Thai legalisation effort has a high probability of succeeding – with previous attempts failing to gain traction. “The key difference is we live in different times,” Bangkok-based Kaplan said in 2023. “Public debt is now 58% of GDP. Government needs to raise revenue to pay this down.”

He adds: “Thailand has casinos at all its borders and the government can capture this money leakage and tax it by having legalised and regulated casinos in Thailand.”

Big casino brands lining up for Thailand

The world’s biggest casino brands are all expected to be making a play for the market. Speaking at the JP Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum earlier this month, Bill Hornbuckle, president of MGM Resorts International, re-iterated MGM’s interest in the market.

“We’re like everyone,” notes Hornbuckle. “There’s a host of the usual characters poking around. Looking for sites and looking for partners.” However, he still believes there’s some way to go. “It’s new, it’s early, early days.

“I think the real question for all of us is going to be at least in the jurisdictions that we currently are in, will the [Thailand] regulatory regime be at a high enough level that it holds muster?

“The government also needs to participate in the proper way going forward. And until we see that, we can’t speak to that,” he concluded.

Hard Rock International is also “absolutely interested” in a multi-billion dollar Thailand-integrated resort. This has been highlighted on multiple occasions by Hard Rock Asia president Edward Tracy to iGB.

“They [the Thai government] are very interested in boosting tourism, expanding the convention market. It’s getting more and more difficult in the convention markets if you don’t have an IR and you don’t have a casino to fund up these expensive convention facilities and hotel.”

Tracy cites Hard Rock studies finding convention-based IRs would be viable for metropolitan Bangkok and resort island Phuket in southern Thailand. The former Sands China chief operations officer estimates a Bangkok IR budget in the US$3.5bn-US$6bn range, with US$1.5bn-US$2.5bn for Phuket.

Tracy notes that Hard Rock has been active in Thailand since 1991. The operator has cafes in Bangkok, Phuket and Chang Mai plus a hotel and cafe in Pattaya. These are all with local partners. “So we’re very familiar with the market; we understand the parameters of foreign investment.”

Can Thailand become the new Philippines?

Thailand’s status as a regional business hub and global tourist destination suggests Thai gaming could blossom into a competitor of the Philippines.

Led by its state-owned body, the Philippine Amusement and Gaming Corporation (Pagcor), the country already has ambitious plans to become South East Asia’s primary gaming hub.

To leapfrog the Philippines however, there is still some way to go. Thailand’s previous parliamentary report on gambling, released in 2023, raises the possibility of special zones for IRs, potentially including exemption from Thai ownership requirements.

A waiver, however, could stoke opposition from the public and business interests. These include the property sector, border casinos and illegal domestic operators.

“Thailand has a once-in-a-generation opportunity to become one of the most successful gaming jurisdictions in the world,” Spectrum Gaming Group managing director Frederic Gushin adds.

The major obstacles that need to be overcome will have to be faced first. As it stands, Thailand ranks 101st in Transparency International’s latest Corruption Perceptions Index. There is also stiff conservative opposition via the country’s Buddhist clergy, as well as underground casino stakeholders.

Additionally, a further question mark hangs over the country’s political process. Currently, the nation’s largest parliamentary party is excluded from government.

Perhaps most crucially though, King Bhumibol Adulyadej, a staunch casino opponent, died in 2016. Recent polling shows most Thais are open to casino legalisation.

“Everyone on all fronts supports it, including the all important support of the [current] king and the Thais themselves,” EuroPacificAsia managing partner Shaun McCamley previously highlighted to iGB.

In a new report, Spillemyndigheden set out details of how it countered illegal activities during 2023. This covers both the online and land-based sectors in Denmark.

The regulator said Stake.com was the highest profile operator blocked last year. This came after it secured a court order to take such action against 49 websites deemed to be running illegally in the country.

Spillemyndigheden says that DNS blocking will continue in 2024, with another case due to close this year.

In terms of the effectiveness of this action, the regulator says this is hard to measure as the sites in question were not blocked for the entire year. As such, it presents data on websites blocked in previous years. 

Based on the 227 sites blocked to the end of 2022, visits to these sites were down from 15.8 million in 2017 to 1.8 million in 2023. This suggests that despite an 89% drop, some users are still able to bypass DNS blocking to gamble illegally.

New threats over illegal gambling

Spillemyndigheden also used the report to highlight possible new threats of illegal gambling in Denmark. This, it said, included streamers and influencers using social media to promote unlicensed sites.

In 2023, the regulator reported a streamer for breaching rules on advertising illegal sites for the first time. The streamer in question had been warned about their conduct several times, with Spillemyndigheden filing a report after repeat offences.

“The police’s assessment was that the streamer had violated the Gaming Act and the streamer therefore received a fine,” the regulator said in the report. “It is the first time we have reported a streamer in a case of illegal dissemination of games. We have since reported two further cases to the police regarding streamers who have disseminated and advertised games without permission.”

Regulator ramps up social media outreach

To help clamp down on new threats, Spillemyndigheden is expanding working partnerships with various parties, working with Facebook to tackle illegal gambling on the social media platform. It also partners Apple and Google to remove illegal apps from the App Store and Google Play, respectively.

“We are working to establish more collaborations with other media where we see that illegal gambling or the illegal dissemination of gambling is taking place,” Spillemyndigheden said.

Alongside this, Spillemyndigheden continues to work on nationwide initiatives to educate players about illegal gambling. Much of this focuses on younger players, with a series of programmes running throughout 2023.

In November, a Spillemyndigheden-led study found 15% of young people in Denmark aged between 15 and 17 have gambled. The legal age of gambling in Denmark is 18.

Land-based issues remain in Denmark 

While illegal online gambling is an ongoing issue for Spillemyndigheden, concerns remain for the land-based market.

During 2023, the regulator carried out 34 inspections at pubs across Denmark over unlicensed gambling. This led to two reports being filed with the police over illegal games, including lotteries.

Furthermore, Spillemyndigheden was involved in cases concerning 17 gaming venues where poker, gaming machines or betting terminals were set up without a permit.

In addition, Spillemyndigheden continued its monitoring of illegal non-profit lotteries. Since launching the programme in 2019, the regulator now supervises 126 associations that have run bingo or banko games. These efforts have led to 38 reports being filed over illegal non-profit lotteries.

Gaming Realms’ 2023 revenue was up by 25.6% year-on-year from 2022’s £18.65m figure. This total exceeded the £23.0m target the company predicted in a trading update in early February.

Licensing revenue, from content distribution deals, grew 33.3% to £19.92m, alleviating a 5% drop in social publishing revenue to £3.50m.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was up by 29% to £10.06m from £7.80m in 2022. This takes into account head office costs of £2.89m, as well as excluding share option and related charges of £2.4m.

EBITDA, with share option and related charges of £632,000 and adjusting items amounting to £194,000 excluded, stood at £9.24m. This is a 24% year-on-year increase on the £7.45m in EBITDA recorded in 2022.

In terms of EBITDA, Gaming Realms’ licensing segment generated £11.3m, while its social publishing sector accumulated £800,000. The company states the results show it is succeeding in its plans to deliver sustainable growth.

Profit before tax went up by nearly half, with 2023’s figure of £5.17m 46.9% up on 2022’s total of £3.52m, while year-end cash balance also jumped significantly, reaching £7.5m, a 158% increase.

Gaming Realms’ chief executive Mark Segal points to the company’s Slingo offering, which is a combination of the business’ slot and bingo offerings, as a core reason for its 2023 success.

“I am delighted to present another record year for Gaming Realms,” Segal says. “We are now licensing our games into 20 regulated markets and have launched with 44 partners in the year and have 75 live games which demonstrates the scale of our content licensing business.”

New partnerships and international growth drive financial success

Gaming Realms’ portfolio of proprietary games on its remote game server went up by 10 to 75 over 2023, with the company granted igaming supplier licences in West Virginia, Sweden and Greece.

The business also launched in the regulated Portugal market. Gaming Realms says the new licences indicate its continued commitment to enhance its “distribution and market diversification”.

Gaming Realms launched its Slingo Originals content with 44 new partners, including giants such as Bet365 and Penn Entertainment, as well as the Ontario Lottery and Gaming Corporation.

Growth in Europe and North America

Gaming Realms states that 2023 was the year it “consolidated” its position in North America. Its content licensing revenues in the region jumped 26% to £8.1m from £6.4m in 2022. It launched with Penn Entertainment in five markets, as well as Caesars Entertainment in four jurisdictions.

The company pointed to its bespoke games in North America as another driver of success there, with its Slingo Red Wings game helping BetMGM to acquire and retain players thanks to a promotion with the Detroit Red Wings, a National Hockey League (NHL) team.

In Europe, Gaming Realms’ revenues increased by 33% to £10.5m from £7.9m in 2022. The company attributed this to growth in its key European markets of the UK, Italy, Spain and the Netherlands. It also promised further launches with new partners in these nations.

Having obtained a supplier licence in Greece, Gaming Realms is expecting to go live with its first partner there soon.

Revenue growth offsets increased costs

Gaming Realms recorded revenue growth of over a quarter to alleviate increases in its expenses.

The company’s marketing spend was over double its 2022 expenditure, up from £38,000 to £95,000, while operating expenses increased by 33.3% from £2.58m to £3.44m.

Although share option and related charges costs fell from £150,000 to £103,000, administrative expenses increased by 13.9% to £4.76m from £4.18m in 2022.

Yet, with adjusted EBITDA up to over £10m for 2023, Gaming Realms reflected on its £0.3m adjusted EBITDA loss in 2019 to outline just how far the company had come over the last five years, highlighting a 48% compound growth in licensing revenue as a key driver of that success.

New launches to kick off 2024 for Gaming Realms

With a quarter of 2024 gone, the company has already signed a number of licensing deals. These include partnerships with Tetris, as well as Relax Gaming for Money Train. In total, the business increased the number of unique players in its licensing business by 24%.

Gaming Realms has also launched with 14 new operators in Q1 2024. These moves include Livescore and DAZN in the UK, as well as Entain in Spain. Gaming Realms has also launched in Ontario with Bet365, the leader in the market.

The company also launched three new Slingo games while signing a distribution agreement with Playtech to aid new market launches.

Gaming Realms described its start to 2024 as “promising” with revenue in line with expectations. This is thanks to a 20% increase in its core licensing business over the first two months of the year when compared to 2023.

Segal added: “With this momentum, we are excited to continue delivering further game launches, new partner deals and, with planned launches in West Virginia and Greece, expanding our global footprint even further.”

Revenue was 53.1% higher than March last year and 5.4% ahead of MOP18.49 in Macau in February. The figure also equalled the post-pandemic high of MOP19.50bn that was posted in October 2023.

While this is good news for the region, Macau’s casinos remain some way behind pre-Covid levels. Before the pandemic started, the Special Administrative Region would regularly produce monthly revenue in the mid MOP20.00bn range. 

Revenue has not exceeded MOP20.00bn since January 2020, shortly before the pandemic started and restrictions were imposed.

Macau revenue tops MOP57.33bn in Q1

Looking at the year to date, revenue in the first three months of 2024 reached MOP57.33bn. This is 65.5% ahead of MOP34.64bn at the same point in 2023. 

It is also comfortably more than the MOP42.40bn generated in all of 2022. Full-year revenue for 2023 amounted to MOP183.1bn – a 333.8% year-on-year increase.

Macau has been free of pandemic-related restrictions since January 2023 after China ended its zero-Covid policy.

Ongoing recovery 

This post-pandemic recovery is likely to continue in 2024. Last month, Fitch Ratings affirmed Macau’s AA long-term foreign currency Issuer Default Rating (IDR), predicting the region’s gaming industry to recover to nearly 80% of pre-pandemic levels in 2024.

Fitch also gave Macau a “stable” outlook as the region’s economy continues to rebound from the pandemic.

Gross gaming revenue is forecast to be around 79.5% of 2019 levels in 2024, compared to 62.6% of pre-pandemic levels in 2023. Fitch is predicting revenue to be 7.6% higher than assumed in the budget.

Operators benefitting from removal of restrictions

Several leading Macau casino operators said the decision to remove pandemic measures helped their performances in 2023. 

Among these brands is Galaxy Entertainment Group, which reported a 211.0% increase in revenue to HKD35.68bn. This, it said, was driven by the full reopening of the Macau market. Revenue at the Galaxy Macau alone rocketed 274.3% year-on-year in 2023, with gaming revenue here up 312.1%.

Elsewhere, Wynn Resorts also said that this reopening boosted the business during 2023. Operations in Macau accounted for $3.10bn of all revenue up 329.7% year-on-year. Group revenue was 73.9% higher at $6.53bn. 

Furthermore, Fitch pointed to Macau’s “strong rebound” after the pandemic in predicting a positive financial outlook for Wynn in the longer term.

Also benefitting was MGM Resorts International, which reported a 23.7% rise in revenue to $16.20bn for 2023. MGM noted significant growth in Macau, with revenue rocketing 368.1% to $3.15bn.

Last week, MGM CEO and president Bill Hornbuckle attended the China Development Forum alongside a number of leading US executives to discuss the country’s relationship with China. 

“MGM Resorts International has been proud of our role in supporting US-China relations through increased bilateral travel and tourism,” Hornbuckle said in a LinkedIn post. “I was honoured to be part of the meeting convened by President Xi to discuss how to use these ties to strengthen the US-China relationship.”

K&F proposes a major strategic reset as an alternative, including selling off Bally’s interactive assets and reducing its investment and focus on sports betting. The land-based business should also refocus, moving away from expensive developments in Chicago, Las Vegas and New York, it argues.

Earlier in March, Standard General submitted a proposal to acquire the remainder of Bally’s for $15 a share. Standard General, led by Bally’s chair Soo Kim, currently has a 25% stake in the operator, the largest of all parties. K&F Growth Capital is a shareholder through various entities.

Bally’s has since formed a special committee to evaluate the offer from the New York-based hedge fund. However, K&F has now hit out at the offer, urging the committee to reject the proposal.

Bally’s chair accused of exploiting “weakness”

Outlining its opposition, K&F highlighted how Bally’s share price has fallen around 45% in the past year, while its bonds currently trade at a 28% discount to par. The hedge fund accused Soo Kim of exploiting this “weakness” and acquiring the group “at a fraction of its fair value”.

Furthermore, K&F says this proposal is counter to the best interests of all stakeholders. It said shareholders are being denied the opportunity to earn up to what may be double the offered value per share.

K&F added that bondholders will be left in an even more levered entity, while incremental leverage will divert “precious” capital that could have been invested into the casino resorts to increase revenues – at the expense of employment and tax generation.

The hedge fund went on to say Bally’s trades with “clear intrinsic undervaluation” compared to its potential. Equally, it said, this undervaluation is because the market has lost confidence in Bally’s current strategy and financial stability.

It referenced unfunded development projects, failed online execution in the US as well as underperforming casino resort properties as concerns. In addition, it flagged the decision to repurchase $69.0m in shares during Q4, saying this jeopardises financial stability. 

Hope remains for Bally’s

However, K&F also spoke about Bally’s “individually strong assets”. Value can be unlocked with the right strategy and oversight, it argued.

The hedge fund said regional expansion strategy between 2014 to 2020 helped establish a “highly compelling” portfolio of casinos. Since then, K&F said Bally’s has “lost its way” due to chasing a “deeply flawed” omnichannel strategy.

“No longer can the company focus on the vanity, negative return projects and assets sought after over the last three years,” K&F said. “After squandering equity value as the chairman of the company and the largest shareholder, Standard General cannot be afforded the opportunity to pick off the company on the cheap.

“Bally’s is at a critical juncture. We firmly believe there is a ready-made, executable path to create material shareholder value, well in excess of Standard General’s offer. In the collaborative spirit of a long-term partnership, we offer our timely plan to strengthen Bally’s and maximise value for all.”

What is K&F proposing?

Mapping out its own proposal, K&F has put forward a six-step plan. It says this will deliver value to shareholders potentially double to what is proposed in the Standard General offer.

Step one simply states reject the Standard General acquisition offer. K&F said the proposal is counter to the best interests of all stakeholders, offering a fraction of value otherwise attainable.

The second step calls for a refocus of management on Bally’s core operational discipline. This includes diverting from distractions such as development projects in Chicago, New York and Las Vegas. 

“The board, if not otherwise distracted by these development projects, has the opportunity and capability to refocus and realign management,” K&F said. 

Bally’s should consider interactive business sale

Moving to step three, K&F calls for monetising non-core international interactive operations and use the proceeds to de-lever. K&F highlighted “minimal” overlap between the legacy global Gamesys business and core US casino operations. 

As such, it said that Bally’s should consider selling the interactive business, either in full or in part. 

“A sale of the division at a highly conservative two times EBITDA premium to where Bally’s currently trades is worth an incremental $11 per share,” K&F said. “It would enable the company to either materially de-lever or use the funds to support continued growth.  

“Again, this value is owed to the public shareholders, not to Standard General post-having acquired the company for a low-ball offer.”

K&F recommends dropping Chicago, Las Vegas and New York projects 

Looking to where Bally’s should focus, K&F refers back to step two when discussing step four. It suggests eliminating construction and operating risk in Chicago, Las Vegas and New York. The hedge fund said the group should not take part in “bet the company” projects such as these.

For Chicago, K&F says the project will yield a return on investment “well below” Bally’s cost of capital. As such, it recommends Bally’s should immediately pursue operating partnership conversations, including with those parties also considered for the licence before Bally’s won the bid.

In Las Vegas K&F said this creates a “cloud of uncertainty” for the foreseeable future, saying Bally’s has no ability to fund development while building Chicago and bidding on a New York licence. It recommends the group engage in exploratory discussions with potential operating partners and acquirors.

As for New York, K&F simply says it is highly unlikely Bally’s will win one of the three downstate New York licences. It added that the pursuit of the licence is an “enormous management distraction” and financial cost. As such, it says Bally’s should withdraw its application to refocus management on core operations.

Could a new online product be an option?

Moving to step five and K&F said revisiting online gaming could help Bally’s, despite billing recent strategy as an “unmitigated disaster”. It reference the purchases of SportCaller, Bet.Works and Monkey Knife Fight for an aggregate $300.0m, as well as the abandoned Sinclair deal, in particular.

K&F also spoke of cumulative operating losses to date exceeding $125.0m and forecast continued material losses in 2024. As such, K&F suggest a new approach, curtailing all online sports activity to an amenity offering.

“[Bally’s should] employ a holistic rethink of all online casino to focus all activities on the core physical-casino customer,” K&F said. “Why not consider an interactive casino product that provides a highly differentiated experience rather than a ‘me-too’ app?”

K&F urges disciplined M&A strategy 

The sixth and final step proposed by K&F outlines a more disciplined, returns-focused M&A strategy. It said by following steps one to five, Bally’s would be in a position similar to where it was before 2020: being able to acquire strategically compelling and synergistic land-based casino resort assets.  

“A strategy that must include an unwavering commitment to evaluating every capital allocation opportunity against a disciplined return on invested capital framework that targets returns well in excess of Bally’s cost of capital,” K&F said.

Concluding its recommendations, K&F said it believes its plan to be “straightforward” and will serve all stakeholders. It adds that the proposal will reduce debt, increase profitability and create significant shareholder value.

“We believe Bally’s and its stakeholders can benefit from our experience, an ‘owner’s’ perspective, and sound advice on strategy and capital allocation, which we have brought to numerous public companies in the past,” K&F said.

“K&F Growth Capital would not have made this investment if we did not believe in a bright future for Bally’s as a public company with an enviable portfolio of high quality assets, a well-capitalised balance sheet and a talented, dedicated group of leaders and employees.  

“We are confident that by acting as partners, Bally’s will grow stronger.”

iGB has contacted Bally’s and K&F Growth Capital for further comment.

Sports betting revenue dropped 41.4% to $66.3m (£52.8m/€61.5m) in February from January’s figure of $113.1m. February’s revenue was also 18.5% down year-on-year, with Ohio accumulating $81.3m in the same month last year, which was the second month of its sports betting market launching.

Ohio also saw a 17.2% decrease in handle, from $810.4m in January to $671.1m in February. However, February’s handle amount was 5% more than the $639m in bets received in the same month last year.

$599.7m was paid out in winnings during February, while $28.3m was written off as promotions. Taxable revenue amounted to $67.6m.

Ohio’s online sports betting sector continues to dominate the market. It was responsible for $66.4m in revenue and $657.7m in handle, the latter of which accounts for 98% of the monthly total. Retail actually finished in the red for the month, losing $122,288 during February.

FanDuel and DraftKings neck and neck in Ohio

As is commonly the case throughout the US, FanDuel and DraftKings are battling it out at the top of the Ohio online sports betting market. FanDuel is based at Belterra Park, while DraftKings is partnered with Hollywood Toledo.

FanDuel has retained its lead, but only just, accumulating $222.2m in handle to DraftKings’ $222m. The two alone combined for 66.2% of Ohio’s monthly handle. The disparity was wider in revenue, with FanDuel’s $28.1m exceeding DraftKings’ $24.2m by $3.9m.

The closest competitors to the top two were Bet365, BetMGM and ESPN Bet, which generated $44.6m, $42.6m and $40.9m in online sports betting handle respectively for February.

Handle and revenue drop despite Super Bowl

Ohio’s declines in both handle and revenue happened in spite of 11 February’s Super Bowl. The game was played between the Kansas City Chiefs and San Francisco 49ers in Las Vegas.

The game was the most-watched American television broadcast since Neil Armstrong walked on the moon, amassing significant betting interest.

The American Gaming Association (AGA) claimed a record number of 67.8 million Americans, or 26% of the country’s adult population were predicted to bet on the Super Bowl, a 35% year-on-year increase. The AGA estimated $23.1bn would be gambled on the game.

Ohio isn’t on its own in recording drops in sports betting interest during February despite the Super Bowl. Sports betting handle dropped for the month in Washington DC, Maryland and New York while Michigan and Mississippi also saw their handle and revenue decline.

Casino halts decline in February

Although Ohio saw stagnation in its sports betting market, its casino industry rebounded. This was after reporting its lowest monthly revenue total in almost three years in January.

February’s casino revenue was $83.5m, 11% up on January’s total of $75.2m, which was Ohio’s second-lowest monthly report ever.

Ohio’s February casino revenue was stable year-on-year, increasing by 1.1% from the total of $82.6m in the same month last year.

Jack Cleveland and Hollywood Columbus led the way with $42.8m and $42.3m in revenue respectively. Hard Rock Cincinnati generated $37.9m, while Hollywood Toledo reported revenues of $35.8m.