Sports Betting Companies Lead Q2 Growth

LIGHTNING RELEASES 08/10/14 Swedish online gaming operator Unibet Group has reported a net profit of £48.1m for the second quarter of 2014 as a result of the disposal of its B2B sports betting division Kambi Group for £35.3m.

Gross winnings revenue rose 24 per cent during the quarter to £77.1m, which included a record high in casino revenues and a growing contribution from the company’s mobile channel which accounted for 32 per cent of total revenue.

And a firm that takes on the bookmakers, USG Partner (www.usgp.org) has  reported a 22% increase in profits for the second quarter trading by trading on  sporting events.

The British Virgin island company USG Partner, originally Universal Sports Group Partner, is a global investment group that trades on sports and prediction markets by employing analysts, mathematicians, statisticians and specialists.

USG Partner has grown in line with other industry leaders, such as Betfair which was founded around its pioneering Betting Exchange, which enables customers to come together and bet against each other, rather than against a bookmaker.

The growth of sports trading can be attributed to cutting edge technology which enables customers to come together and bet against each other, rather than against a bookmaker. Betting Exchanges, such as Betfair make money by taking a small commission from the winning side of the bet.

Online gaming is still just 8.9% of the global gambling industry by revenue, generating $40 billion of the $451 billion total in 2013, but that’s still a compound annual growth rate (CAGR) of 25% between 2000 and 2013. Schmidt-Chiari expects online gambling CAGR to slow to 5.7% through 2017, which still better than the global gambling industry’s projected 4.3%, but this average misses the big opportunity presented by mobile gaming.

Unlike online gamblers, mobile gamblers are less likely to shop around for the best odds, and Schmidt-Chiari says that mobile operators have managed to get better margins and a higher average revenue per user (ARPU). There’s also a lot more interest from people who might not have been willing to gamble in the past. 

Taken together, Schmidt-Chiari expects 36% CAGR in mobile gaming from the 2013 level of $2.9 billion, and the companies best positioned to take advantage of mobile will have the best returns over the next few years. Of the six stocks that Schmidt-Chiari has initiated coverage on (not all exclusively online) he rates Betfair Group Ltd (LON:BET) as a hold stock. If fact, Betfair Group (LON:BET) has received an average rating of “Hold” from the sixteen analysts that are currently covering the company.