GenM wholly-owned subsidiary in New York has launched its mobile betting app after winning a mobile sports betting licence in Nov last year. While we are positive on this development as it allows the group to tap in the robust and growing mobile sports betting market, we believe that it will likely need to undergo a gestation period before it can contribute to the bottom line meaningfully considering the heavy advertising spend in its initial launch. Maintain BUY with an unchanged SOP based TP of RM3.69.

NEWSBREAK

GenM wholly-owned subsidiary in New York (NY) has launched its mobile betting app on 3 Mar after winning a mobile sports betting licence in Nov last year. Resorts World New York City (RWNYC) said it had accepted its first wager in New York after launching its mobile sports betting app, named Resorts World Bet (RWB). It said that the app was launched just in time for March Madness, the annual month-long collegiate single elimination basketball tournament played in the US which accepts bets on the outcome of the competition. (The Edge)

HLIB’s VIEW

New York – the largest mobile sports betting market. Mobile sports betting went live in the NY on 8 Jan 2022. Despite operating for only 24 days in Jan 2022, NY had already cemented itself as the largest mobile sports betting market in the US by raking in USD1.67bn of mobile sports bets, which surpassed New Jersey’s record of USD1.3bn in Oct 2021. As at end-Jan 2022, only 6 out of the 9 approved operators had started their operations. Cumulatively, the net gaming revenue (NGR) for the 6 operators were USD60.8m (see Figure #1). While the mobile sports betting in NY was off to a strong start, it remains to be seen whether the momentum can sustain going forward as the first month figure was partially lifted by the heavy promotional offers given to new players (see Figure #1).

Resorts World Bet - late to the party. As part of the initial launch, RWNYC has invested nearly USD1m to install digital displays across its premise to showcase all the big games throughout the year. In addition, RWB is also offering risk-free bet of up to USD500 for new players. We believe that RWB could be at a disadvantage compared to its competitors as (i) it was relatively late to launch the app (players may already have their preferred operator to bet already); and (ii) it is a lesser known brand compared to the better established players such as Caesars, FanDuel and DraftKings.

No significant contribution in the near term. As seen in Figure #1, the NGR was unevenly distributed among the operators. For example, despite launching on the same date, Caesars’ NGR was 48x of the NGR of BetRivers due to (i) higher hold percentage for Caesars (9.4% vs. 3.2% for BetRivers); (ii) Caesars is more well-established; and (iii) Caesars offered a more attractive promotion for new players compared to BetRivers. Similarly, for RWB, as one of the lesser known players, we expect that it will need to spend heavily in advertising during its initial launch and continue to provide offers to players in order to entice players to join and gain market share. In addition, NY also has a high tax rate of 51% on GGR. Thus, the enormous headline handle figure of USD1.67bn only translated to NGR of USD60.8m (3.6% of the handle figure). Due to these reasons, we expect that RWB will likely need to undergo a gestation period before it can contribute meaningfully to the bottom line of the group. Having said that, we are still positive on this development as it allows the group to tap into the robust and growing mobile sports betting market in the US, which could potentially pave the way for it to penetrate to other states in the future.

Forecast. Unchanged.

Maintain BUY with an unchanged SOP based TP of RM3.69. We continue to like GenM as we believe its prospects are improving with the return of crowd to RWG and the potential border reopening. With the addition of SkyWorlds theme park, RWG will be able to attract a bigger and more diverse crowd from both gaming and non-gaming visitors. Furthermore, we expect its UK and US operations to sustain their positive contributions as seen in 4Q21.

Source: Hong Leong Investment Bank Research - 7 Mar 2022