The New Criterion: two gambling exposures worth a punt TIM...

The New Criterion: two gambling exposures worth a punt

TIM BOREHAM

Independent Investment Research

about 3 hours ago​

OtherLevels (OLV) 4c
OtherLevels CEO and founder Brendan O’Kane believes a looming crackdown on gambling promotion will help his heavily wagering exposed digital promotions business, which sounds counterintuitive.
But he reasons if the corporate bookies can’t saturate sports coverage from tennis to tiddlywinks with their special introductory odds, they will need to do more to nurture their existing customer base.
The federal government last year said it would ban betting ads from live sport before 8.30 pm - a measure not yet enacted.
But agitants such as the Nick Xenophon camp are pushing for much more, amid perceptions the industry has way over reached with its blanket-bombing approach to advertising.
The UK-domiciled William Hill has already sniffed the breeze and is odds on to exit the Aussie market, citing regulatory pressures and increased state taxes.
“In Australia there has been a strong focus on brand building and acquisition which has raised questions in the public eye about whether this is what we want to see on TV at 7 pm,” O’Kane says.
The bottom line is that if you’re a punter already on the books, don’t be surprised to be texted live odds pertaining to an event the clever algorithms know you’re interested in.
The in-play aspect is crucial: according to Bet365, 72 percent of sports betting is carried out after the opening siren (or whistle), with 80 per cent of tennis bets places after the match has started.
OtherLevels gambling-heavy client book includes Ladbrokes, Bwin, the National Lottery, Matchbook, Topbetta and Golden Nugget. “Tattscorp” is also a client.
The company also does work for Flight Centre – another mover in digital reach – and various outposts of Coles.
However, OtherLevels’ key relationships are with the bookies’ British parents – and for good reason. “The UK has been more cautious compared to Australia,” he says. It’s a bigger market with mote maturity and visibility of risks.”
OtherLevels client contracts are typically for 12 months, with an upfront licensing fee and a per-text or per-email fee.
OtherLevels listed in March 2015 after raising $7.5m at 20c apiece. But the company struck early trouble by burning too much cash and making an ill-fated foray into the US.
“We dug ourselves a very deep hole and spent the last 18 months digging ourselves out of that hole,” O'Kane said.
OtherLevels preponderance of wagering clients is not surprising, given the sector was one of the first to embrace digital marketing. But OtherLevels December (second) quarter update showed $2.066m of cash inflows, well up on $1.353m achieved for the September quarter and $1.132m for the previous December quarter.
More importantly, the company turned a $676,000 deficit into a $41,000 surplus for the first time.
OtherLevels market cap of $8.5m implies little upside, which could be construed as an opportunity.
There’s a clump of investors who can be relied on to hang around: O’Kane and the board account for 35 percent of the register, with Queensland Chief Entrepreneur (yes there is such a thing) and Shark Tank judge Steve Baxter holding a further 20 percent.
Tim Boreham edits The New Criterion