Punters can get even odds on the Springboks winning the Rugby World Cup, and those feeling slightly unpatriotic, but realistic, could get 5-6 on the All Blacks. Gamblers unable to resist longer shots can get 10-1 odds on England and 28-1 on Argentina.
Or you could make a safer bet on some of the bookies. Unfortunately, pure sports bet plays are not really available on the JSE, though investors can get partial exposure through gaming stocks Sun International, Tsogo Sun and RECM & Calibre.
Interestingly, more than 20 years ago the JSE did host a pure sports betting play in the form of the short-lived National Sporting Index listing. That company not only stumbled into financial problems but was tainted with the cricket match-fixing scandal when one of its senior employees — albeit in a personal capacity — was instrumental in tempting South African skipper Hansie Cronje to the dark side of the pitch.
In recent months the sports betting divisions of all three listed gaming groups have enjoyed a growth spurt
To date, sports betting has played largely fourth fiddle to mainstream gaming formats like urban casinos, limited-payout machines (LPMs) and electronic bingo terminals (EBTs). But in recent months the sports betting divisions of all three listed gaming groups have had a growth spurt. An initial thought would be to credit the Rugby World Cup and Cricket World Cup tournaments running concurrently, alongside perennial favourites like the English Premier League, the tennis Grand Slams and Formula One racing.
But you would be wrong. What is really driving increased business levels is the hosting of live casino games and slot machines on the sports betting websites. It appears punters are pushing these tabs with some vigour.
A throwaway line from Capitec’s recent results presentation notes: “Gambling transactions in proportion to total transactions increased by 35% year on year, putting further strain on household cash flow.” You can bet your bottom dollar the bulk of these are online gaming transactions — and this again underlines the power of “sin industries” even in times of economic strain. Sun International’s recent results presentation showed that sports betting made up the smallest portion of gross gaming revenue (GGR) at subsidiary SunBet.
The breakdown is most telling. SunBet grew GGR by an eye-popping 173% to R379m in the half-year to end-June, with CEO Anthony Leeming reporting a “significant uptake” in slots games since the launch in August 2022 and a 67% growth in live casino games. The online slots business hiked GGR to R218m (previously R139m) and live casino games managed R82m (R49m). The traditional sports betting business slipped slightly to R79m.
For context, SunBet, which generated top-line income of R298m, is now bigger than Sun’s Boardwalk casino in Gqeberha, and roughly equal to the combined top-line contributions of the group’s Meropa, Windmill and Flamingo casinos. But with a more than respectable margin of 30%, SunBet’s interim earnings before interest, tax, depreciation and amortisation (ebitda) of R90m is shifting closer to Sun’s well-established Gauteng casino, Carnival City.
The odds certainly favour another strong push by SunBet in the second half. Sun reported that SunBet now has cash deposits of R6.6m a day — up 220% from 2022. In July daily cash deposits had risen to over R9m, which should underpin a vibrant second-half performance.
Tsogo Sun’s sports and online gaming is not quite as developed as Sun’s, but the group’s annual report envisages “having more visibility” in the market in the 2024 financial year. Tsogo’s online betting platform was launched in December last year. CEO Chris du Toit says the expansion of betting libraries is under way. “Expansion of the playTsogo and Bet.co.za businesses will be a key focus of the 2024 financial year, with significant resources being applied to the growth of the online betting division.”
Tsogo reported that GGR from online betting is still at an early stage of just more than R100m for the year to end-March.
RECM & Calibre’s gaming subsidiary, Goldrush, which specialises in EBTs and LPMs, reported a slight uptick in sports betting and online gaming revenue to R183m (previously R173m) in the year to end-March. The online gaming segment was up 7% for the period.
For now, based on sheer size, Sun looks the default bet for punters wanting to put down early wagers on the growth in online gaming.
Sam Sithole, CEO of Value Capital Partners, a large shareholder in Sun, says SunBet could push ebitda for the full year to end-December to between R180m and R200m. “It’s able to leverage off the Sun International brand. Daily deposits more than doubled and the margin is over 30%. It’s flying! Online will be bigger than Carnival City this year … we think it can be more than the physical casinos.”
Sithole says the appointment of Nigel Payne to the Sun board was a critical development. Payne was formerly CEO of UK-based Sportingbet and an industry consultant in online gaming. Sportingbet is one of the world’s largest internet gambling companies, with positions in internet sports betting, poker and casinos across 185 countries.
Payne was also involved in the listing, scaling up and exiting of Stride Gaming in the UK, and is chair of Green Man Gaming, a nonexecutive director of Ascot Racecourse Betting & Gaming and a consultant to Spreadex.
Sun, Tsogo and RECM & Calibre are well behind the considerably larger market leaders in South Africa — Hollywoodbets, Lottostar and Betway
The difficulty, however, for Sun, Tsogo and RECM & Calibre is that all three are well behind the considerably larger market leaders in South Africa — Hollywoodbets, Lottostar and Betway. There is also a surfeit of little sports betting operations that, in all honesty, simply won’t have the resources to endure against bigger players with bigger marketing budgets. Whether the established gaming players look to buy more promising online boutiques to gain market share or leave these to flounder in a competitive market remains to be seen.
In his annual review, RECM & Calibre executive director Piet Viljoen says online betting remains “fiercely competitive”. “Even more operators have entered the market in the past year — some of them with enormous marketing budgets.”
But Leeming tells the FM that SunBet will increase its marketing spend by 150% in the next financial year and still maintain its ebitda margins.
Of course, the long-shot online betting option that more excitable punters might be eyeing is gaming investment group Grand Parade Investments (GPI). Now under the control of former investment banker and gaming sector enthusiast Greg Bortz, GPI owns significant minority stakes in Sun International-controlled casinos GrandWest (Cape Town) and Golden Valley (Worcester), as well as 30% of alternative gaming hub Sun Slots.
But in its latest annual report, GPI advises that its future strategy will include selected mergers & acquisitions in the gaming sector; and “de novo” online gaming organic growth opportunities.
The “de novo” reference suggests that online gaming initiatives will be started from scratch. This might scotch ongoing speculation that Hollywoodbets could be reversed into GPI.
There is a discernible link between Bortz and Hollywoodbets. Bortz and Hollywoodbets, which is controlled by Owen Heffer, jointly rescued Kenilworth Racing when the business was rapidly running out of track. More recently Bortz and Hollywoodbets made a R500m offer to rescue another horse racing business, KwaZulu-Natal-based Gold Circle.
It’s possible that the two racing businesses, in the longer term, may get steered towards GPI. But Hollywoodbets would be the ace to play in transforming GPI into one of the JSE’s gaming heavyweights.
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