- Brazilian acquisition accelerates expansion
- Planned investment will lower group profit
- Capital markets day on 25 September
Global sports betting and gaming giant Flutter Entertainment (FLTR) has staked a claim in the fast-growing Brazilian market after buying a 56% stake in leading operator NSX Group for approximately $350 in cash.
Flutter will roll in its existing Brazilian business and has an option to increase its shareholding in the combined enterprise in year five and year 10 following completion.
The shares fell 125p or 0.75% to £167.20, but remain close to all-time highs after gaining around 20% over the last 12-months compared with a 9% gain for the FTSE 100 index.
Chief executive Peter Jackson commentated: ‘We believe combining the extensive local expertise of the NSX team, our existing Betfair business and the power of the Flutter Edge, will create a compelling opportunity to capitalize on the growth opportunity in Brazil which presents an exciting runway of future growth.’
REGULATION ON THE HORIZON
Brazil is expected to regulate its gambling market in early 2025 after experiencing strong demand for sports betting and iGaming, with gross gaming revenue growing at an annualised rate of 38% per year since 2018 to almost $3 billion in 2023.
NSX has a 12% share of the sports betting market and 9% of the online betting market making it the fourth-largest operator and more than three times the size of Flutter’s Betfair Brazil unit.
Flutter is looking to replicate the success of its US strategy after the country regulated in 2018 and expects to ‘drive market share growth and embed future profitability through disciplined customer investment’.
This is expected to result in Flutter Brazil racking up adjusted an EBITDA (earnings before interest, tax, depreciation, and amortisation) loss of between $90 million and $100 million in 2025.
The company will provide a further update at an investor day on 25 September where management will also discuss Flutter's ‘exciting organic growth and cash generation potential in the medium-term’.
EXPERT VIEW
Analysts at Jefferies noted the planned investment implies a low single-digit cut to consensus 2025 EBITDA but see a path to accelerated growth and greater medium-term profitability.
They believe the investor day in New York is likely to be a ‘material’ catalyst for the shares.
