European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<p><a href="https://www.smartkarma.com/entities/entain-plc" target="_blank" data-smartkarma-citation="entities:23926:1" rel="noopener">Entain (ENT LN)</a> confirmed that it had received a proposal from <a href="https://www.smartkarma.com/entities/draftkings-inc" target="_blank" data-smartkarma-citation="entities:29248:1" rel="noopener">DraftKings Inc (DKNG US)</a>. On 22 September, the Board said that following an earlier approach at 2,500p/share (mix of DraftKings shares and cash) which was rejected, a further proposal was received on 19 September 2021. DraftKings Inc. revised the offer price to <strong>2,800p/share</strong> (630p in cash and and the balance payable in new DraftKings Class A common shares).</p>
<p>The acquisition of Entain could be strategic for DraftKings, which is eyeing international expansion. The consideration represents a premium of 46.2% to Entain’s closing share price on 20 September 2021, 4.5x EV/NTM Sales, <strong>19.2x EV/NTM EBITDA</strong> and 39.2x Fwd P/E (source: Capital IQ consensus).</p>
<p><strong>PUSU deadline</strong> is <strong>19 October</strong>.</p>
<p>There is some interloper risk. In case DraftKings presents a firm offer, <strong>MGM could potentially bid again for Entain</strong>. Nevertheless, MGM in the past has said that its joint-venture agreement with Entain gives it protection against another entity trying to acquire Entain without its approval.</p>
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<p>Moreover, the gambling business is ideal private equity territory. Betting businesses are cash cows and the revenue flows can be (or should be) precisely predicted. The lower cost of capital of private equity firms and the financial discipline introduced are a key advantage in the industry.</p>
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<p><strong>BetMGM</strong> (Entain’s joint venture in the US with MGM Resorts) <strong>continues to perform strongly</strong>. H1 NGR of $357m. Number two operator for sports-betting and iGaming across the US with 22% market share, number one operator in iGaming, extending leadership with 30% market share. Total combined investment in BetMGM by joint venture partners expected to be $660m by the end of 2021.</p>
<p><strong>Valuation of Entain</strong>. By using the median of comparables <strong>11.9x EV/Fwd EBITDA</strong>, the implied valuation of Entain would be 1,628p/share. To value BetMGM, I expect total revenue of $3.6 bn by 2025. By applying a 3.0x EV/Fwd Revenue multiple, the valuation of the JV could reach $10.8 bn, of which $5.4 bn for Entain (equivalent to <span title="Share Price as of Dec-31-2020 FY: 2020 Period End Date: Jun-30-2020 Period Type: LTM Value: £ 11.34, Currency: GBP">£</span>3,933 mn, or 672p per share).</p>
<p>Adding the base case plus BetMGM, my longer term <strong>TP</strong> is <strong>2,300p</strong>. The shares seem to be fairly valued at market close of 23 September, nevertheless two takeover attempts in nine months mean a lot of interest in Entain. I would therefore be <strong>LONG</strong>.</p>

Entain (ENT LN) confirmed that it had received a proposal from DraftKings Inc (DKNG US). On 22 September, the Board said that following an earlier approach at 2,500p/share (mix of DraftKings shares and cash) which was rejected, a further proposal was received on 19 September 2021. DraftKings Inc. revised the offer price to 2,800p/share (630p in cash and and the balance payable in new DraftKings Class A common shares).
The acquisition of Entain could be strategic for DraftKings, which is eyeing international expansion. The consideration represents a premium of 46.2% to Entain’s closing share price on 20 September 2021, 4.5x EV/NTM Sales, 19.2x EV/NTM EBITDA and 39.2x Fwd P/E (source: Capital IQ consensus).
PUSU deadline is 19 October.
There is some interloper risk. In case DraftKings presents a firm offer, MGM could potentially bid again for Entain. Nevertheless, MGM in the past has said that its joint-venture agreement with Entain gives it protection against another entity trying to acquire Entain without its approval.

Moreover, the gambling business is ideal private equity territory. Betting businesses are cash cows and the revenue flows can be (or should be) precisely predicted. The lower cost of capital of private equity firms and the financial discipline introduced are a key advantage in the industry.

BetMGM (Entain’s joint venture in the US with MGM Resorts) continues to perform strongly. H1 NGR of $357m. Number two operator for sports-betting and iGaming across the US with 22% market share, number one operator in iGaming, extending leadership with 30% market share. Total combined investment in BetMGM by joint venture partners expected to be $660m by the end of 2021.
Valuation of Entain. By using the median of comparables 11.9x EV/Fwd EBITDA, the implied valuation of Entain would be 1,628p/share. To value BetMGM, I expect total revenue of $3.6 bn by 2025. By applying a 3.0x EV/Fwd Revenue multiple, the valuation of the JV could reach $10.8 bn, of which $5.4 bn for Entain (equivalent to £3,933 mn, or 672p per share).
Adding the base case plus BetMGM, my longer term TP is 2,300p. The shares seem to be fairly valued at market close of 23 September, nevertheless two takeover attempts in nine months mean a lot of interest in Entain. I would therefore be LONG.

DraftKings/Entain: Cash and Shares Approach

Founder/CEO of ROK Advisory, ROK Advisory LLC

Ken S. Kim

Founder/CEO of ROK Advisory

ROK Advisory LLC

ROK is an independent research advisory firm. We guide you to minimize the information gap between foreign and local investors in Northeast Asia with a focus in Korea, Taiwan and Japan.

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Equity Bottom-Up

<div id="x_divRplyFwdMsg"><div>NCSoft (036570 KS) has been hammered as brokers downgrade on the poor reception to their new game,  Blade &amp; Soul 2, is far below anticipated in terms of both user feedback and use.  </div></div><div>
<div>The worry here is that now all the eggs are in one basket again (Lineage) as dependency on one game and failure to diversify is a big concern. </div>
<div></div>
<div>When Lineage 2M launched Nov 27th 2019 stock was down 7% on disappointing numbers vs. St estimates and the current fall in Apple AppStore ranking was based on the first 4-5 hrs mind you the Google App user score is 2 out of 5 stars which is concerning.</div>
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NCSoft (036570 KS) has been hammered as brokers downgrade on the poor reception to their new game,  Blade &amp; Soul 2, is far below anticipated in terms of both user feedback and use.  
The worry here is that now all the eggs are in one basket again (Lineage) as dependency on one game and failure to diversify is a big concern. 

When Lineage 2M launched Nov 27th 2019 stock was down 7% on disappointing numbers vs. St estimates and the current fall in Apple AppStore ranking was based on the first 4-5 hrs mind you the Google App user score is 2 out of 5 stars which is concerning.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>Back on the 31st March this year, the SGX <a href="https://api2.sgx.com/sites/default/files/2021-03/Consultation%20Paper%20on%20Proposed%20Listing%20Framework%20for%20Special%20Purpose%20Acquisition%20Companies.pdf" target="_blank" rel="noopener">announced</a> a regulatory framework for SPACs to list on the SGX. This followed a <a href="https://api2.sgx.com/sites/default/files/2018-09/Consultation%2BPaper%2Bon%2BProposed%2BRevisions%2Bto%2BMainboard%2BAdmission%2BCriteria%2Band%2Bthe%2BIntroduction%2Bof%2BSPAC.pdf" target="_blank" rel="noopener">consultation paper</a> over a decade earlier.</p>
<p>The feedback phase ended on the 28 April - there were 80 respondents - and unfazed by increased regulatory oversight on blank cheque companies in the US, the SGX <a href="https://www.sgx.com/media-centre/20210902-sgx-introduces-spac-listing-framework" target="_blank" rel="noopener">announced</a> a proposed listing framework yesterday.</p>
<p>The detailed paper is <a href="https://api2.sgx.com/sites/default/files/2021-09/Response%20Paper%20on%20Proposed%20Listing%20Framework%20for%20Special%20Purpose%20Acquisition%20Companies.pdf" target="_blank" rel="noopener">here</a>. </p>
<p>The final framework <em>mostly</em> mirrors the March consultation paper, with the largest change being the abolishment of limits on the exercise of redemption rights by independent shareholders.</p>
<p>More below the fold.</p>

Back on the 31st March this year, the SGX announced a regulatory framework for SPACs to list on the SGX. This followed a consultation paper over a decade earlier.
The feedback phase ended on the 28 April - there were 80 respondents - and unfazed by increased regulatory oversight on blank cheque companies in the US, the SGX announced a proposed listing framework yesterday.
The detailed paper is here. 
The final framework mostly mirrors the March consultation paper, with the largest change being the abolishment of limits on the exercise of redemption rights by independent shareholders.
More below the fold.

Green Light For SPAC Listings In Singapore

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

<p>Headline Developments As has been widely expected, China has moved to greatly reduce the time under-18s spend playing computer games.  Under the new rule, younger gamers will be restricted to one hour (8 pm - 9 pm) of online games on Fridays, weekends and holidays, with online gaming companies barred from providing gaming services to minors in any form outside of those hours.</p>

Headline Developments As has been widely expected, China has moved to greatly reduce the time under-18s spend playing computer games.  Under the new rule, younger gamers will be restricted to one hour (8 pm - 9 pm) of online games on Fridays, weekends and holidays, with online gaming companies barred from providing gaming services to minors in any form outside of those hours.

<p>Headline Developments SpaceX (private) is set to launch The Pentagon’s next-generation national security satellite to orbit - the first launch with a reused rocket.  The launch of the GPS III SV05 for Space Force (below) will take place using the same Falcon 9 rocket booster that launched GPS III SV04 last November.</p>

Headline Developments SpaceX (private) is set to launch The Pentagon’s next-generation national security satellite to orbit - the first launch with a reused rocket.  The launch of the GPS III SV05 for Space Force (below) will take place using the same Falcon 9 rocket booster that launched GPS III SV04 last November.

United States

DraftKings Inc. operates as a daily fantasy sports contest and sports betting company. The Company allows users to enter daily and weekly fantasy sports-related contests and win money based on individual player performances in American sports. DraftKings serves customers in the United States.

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DraftKings (DKNG US)

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