GAMING : Betting Battles: Predictions, proprietary polls & parlays

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GAMING : Betting Battles: Predictions, proprietary polls & parlays

weakness as a factor has been underappreciated.

As this eases we expect growth to reaccelerate whilst North and Latin American regions

have good mid-term growth prospects. Evolution also appears back on the front foot

following 2021’s disparaging Black Cube report which was subsequently revealed to

have been commissioned by a rival firm. On near term valuation the shares offer a double

digit FCF yield and sit on net cash equivalent to nearly 10% of its market capitalisation.

Hence, even allowing for EM & unregulated market exposure we see attractive upside.

Notably Evolution is also the least-loved in our coverage (at least by the sell-side). We

initiate coverage at Outperform

Flutter Entertainments (-): we’re not Fans

Most of Flutter’s revenues come from a range of International markets including UK, Italy

& Australia which have mixed, but in aggregate, moderately positive long-term prospects.

The remaining 40% of sales but, we estimate, 70% of EV is attributable to its US

operations, FanDuel. Here the aggressive expansion of Federally regulated prediction

markets looks set to significantly dampen growth and moderate margin expansion. These

may eventually be curtailed in sportsbetting by legal challenge or legislative change, but

this is likely 1-3 years away. Meanwhile wider US political sentiment on gambling is

becoming less supportive, which could lead to slower state legalisation, increased player

restrictions and higher tax rates. We see downside risks to consensus, our DCF-based

target price points to downside whilst we think Fox Corp’s 16% stake option in FanDuel

is unlikely to be exercised. We initiate coverage on Flutter at Underperform.

DraftKings (-): castle under attack