Best Of The Best Share Discussion Threads

[studentinvestor13] 06/2/2023 21:59

ok... if anyone wants to give me things to add tell me and I will do and then maybe we can sticky this. i will add more to this tomorrow

Best of the Best
The UK’s leading online competition company
- TLDR; BOTB’s simple concept belies player credibility built over 2 decades with 1.9 million players in the database and >800% share price gains after IPO. ROIC and ROCE is off the charts with £5m revenue generated on £1m of PPE and negative working capital. Dividends and tender returns over and above the 800% share price gain have been huge and the platform is very scalable with operational gearing. The pandemic is over and BOTB will recommence its growth path. BOTB has more than £5m of net cash at the end of October getting to about £8m cash by the end of April this year. I do not see why BOTB will not trade on 14X EPS because of the big cash pile? That is 830 pence today on 60p of eps and eps upside could be far more. That is upside I expect if they go back to the UK growth history or if they get international humming is far more. finnCap have a 990p share price target based on a 6% cash flow yield.

- What is the UK growth case? Without any up side from international growth. I think 2025 revenue could be £35m (finnCap say £30m) and a margin of 26% (finnCap say 22%) to get 75p of eps. That needs growth of 12% in revenues in the next 2 years. BOTB was growing at these levels before the pandemic and BOTB in its annual report said itself “We are preparing the Company for a return to steady ongoing growth that, while not at the levels achieved in FY2021, is significantly above the historic levels that we achieved ahead of the conversion of the business from a bricks and mortar retail player to an online only operator. “ If it grows 12% then it can trade at 16 times that 82p which is 1300p, and it would be throwing off £6.5m of distributable cash flow every year on top of the £8m at this year end I expect and with a today market cap value of £48m.

- What is the international case? Based on my experience and who wins the games every week I would hazard a guess that more than 90% of the player base is in the UK every week. Thank you feverfan for pointing out international is about 10% of sales. There are very few international winners and that does not surprise me because BOTB do not put much effort into recruiting international players. What is BOTB with GIL Invest can replicate this model internationally? If they get 3 countries to only 10% of the scale of the UK in the next 3 years then that is a £10.5m revenue business. Even if that is only a 12% operating margin, that is another £1.3m of EBIT and another 15% to add onto the UK business to get to 87p. If international works then it can trade at a higher multiple because the growth would be much faster and the runway is bigger, but if we still say 16x that is 1400p and it would be throwing off £7.5m of distributable cash flow every year on top of the £8m at this year end I expect and with a today market cap value of £48m.

- What is BOTB? BOTB is an online competition platform for car, cash and lifestyle prize competitions. It was founded by William Hindmarch, the CEO, and was set up in 1999 in London. I am a player of the game and love it. Some formats (the Weekly Lifestyle and the Friday cash game) are skill question based like you hear on the radio but the main midweek dream car competition is a differentiated spot the ball competition where entrants must guess the coordinates of a ball in a picture that does not have a ball. A panel of judges will collectively determine where they think the ball is and that is used to set the prize coordinate. The closest entrant wins. If you guess close then you will receive a big share of your entered money back in dream car credit. It’s a fun game, with a slick user interface and a loyal customer base.

- The online competition market; The online competition market is fast growing and BOTB is a small fish in this pond. Removing the exceptional growth and exceptional fall back of the pandemic era, BOTB has been growing quickly on average for years. The other big competition company is Omaze which does housing giveaways and the rest are small raffle companies that are not running skill based competitions but which have fixed ticket numbers. These companies must offer a free postal entry because they are not using a skill format but I have doubts if they honour it. Total industry gross gambling yields in the UK are over £14 BILLION (hxxps://www.statista.com/statistics/467892/gross-gambling-yield-in-total-in-great-britain/). Double BOTBs gross profit in the interim report and they are only at £16 million gross profit. BOTB is growing fast from a market share of 0.1%. The National Lottery has a gross gambling yield of >£3 billion... BOTB is tiny compared to the size of the National Lottery.

- Entry barriers; Some people claim BOTB has low entry barriers. This is true but it is not a problem and BOTB is a bigger player than most. These players all have a small share of the market and are taking more share. The biggest problem for a new entrant is legitimacy; who in their right minds wants to give money into a company they cannot trust in. There is also a problem with prizes. With small competitions you may only want to give away a 15 year old Ford Focus…. BOTB can afford to do yuge giveaways. 6 digit value cars with £50k in the boot, and this week a half a million cash offering. Small competitors cannot do this and this keeps BOTB ahead of the curve. Ticket prices have gone up because of inflation in the last 2 years but they slide lower over time and democratise the player base (because some people only want to play 50p or £1 tickets not £5 tickets and some competitors cannot do that as they will never cover their overheads. BOTB is also an enjoyable game format in dream car. I play it myself and talk about it with my mates. It is way more interactive than the National Lottery or straight raffle competitions. I often get my spot within zone 2 of the judging so get a good amount of my credit back to re play with and have the Silver tier loyalty of Supercharged Club.

- Visitor trends; hat tip to Doctor888 on advfn for the data. BOTB is a growing business but had a boom and bust player base pandemic infused period. This caused a big spike in players because people were locked down in their houses and handed furlough cash to spend. That caused quite absurd growth in 2020 but this also caused a horrible period of normalisation after that. Now we are fully settled down and BOTB comes out of the pandemic with visitor trends double that of the era before the pandemic and it is back onto its longer growth path. BOTB has 1.5 million visitors every single month to its website.

- Welcome Teddy Sagi; Israeli entrepreneur took 29.9% of BOTB at 400p from the founders last year and his family trust GIL is working together with BOTB to thrash out an international expansion agreement. I see this as a better way for botb to attack the international market as GIL have deep knowledge of international markets and can offer a cost light traffic channel. When you see 29.9% taken you always wonder if a takeover bid comes at some point in the future because the threshold to waive or offer is 30%. Teddy is a marmite character but he has been very successful in founding global software gambling leader Playtech before he was even 30 and it has been listed on the UK markets for more than 15 years. He launched and listed SafeCharge a Canadian payments company that was taken over and also launched very successful UK listing Kape Technologies. He also owns a large part of the London Camden market.

- Great history of growth; Before the pandemic distortion BOTB grew revenues from £5.9m in 2007 to £17.8m in 2020 and profits before tax from £0.7m to £4.2m (5 fold increase). The pandemic supercharged growth in a spike fashion to £46m of revenue and £14m of profits before tax which have now settled back down. In its formative years, BOTB operated primarily through airport kiosks, where customers could purchase tickets for its car competitions. Over time Hindmarch and co realised that an online model was the way to go so the company launched its online platform.

- Cash; BOTB market value today is £49m and in a few months it should have I think £8m of cash so £41m of value excluding the cash. Since 2017 I calculate BOTB has created free cash flow of £30m much of which has been distributed.

- 'Bear' case; I do not see this as regulation. They use the same concept that radio stations and other TV programmes use to filter entries with a skill question unlike much of the competitors who only do raffles but even if we use all of those competitors together they are a small pie in the context of uk gambling and I do not see they coming under the spotlight any day soon. Yiannimize and other competition formats like Omaze are around and i think the risk would be that they become a bigger and bigger part of the market and start eating botb's share. I do not see this as realistic any day soon for the same reasons that they all have niche small positions in the market and average joe bloggs has not heard of any of them (even omaze). BOTB is also one of the biggest players so would weather the storm better imo. Don't forget that botb has a loyal core player base who enjoys playing the game each week. Nonetheless if botb stopped growing profitability from now on it could trade like a mature gambling stock on 6 to 7x earnings excluding net cash which is 450p. I do not see the conservatives hiking RGD any day soon either but if the Lib Dems or Labour got into power in a few years time then it may well leap up to 30 or 40% and squeeze some of the smaller market players.

[studentinvestor13] 06/2/2023 18:22

Holders be getting rewarded again i am sure. Covid was a false dawn to a phenomenal success story on AIM that will continue. As a player of the game I stand by this becoming a global business and it is very low on P E for the potential. If one or two people DM me or give me a thumbs up I shall sit down and write down a proper summary case on Best of the Best for the newbie covering all bases.

[middlesboroughfc] 06/2/2023 17:04

The climb to £34 started

[johndoe23] 06/2/2023 15:52

What happened at 1330?

[someuwin] 06/2/2023 15:48

Cheap on the existing business. With the added excitement of what billionaire founder of Playtech, Teddy Sagi's 30% involvement will bring.

[someuwin] 06/2/2023 15:36

finnCap - 26/Jan/2023

BOTB (BOTB): CORP
Reassuring interims
BOTB continues to explore the business development opportunities with Globe Invest Ltd (GIL) and deliver results from the current business in line with expectations. The opportunity is to replicate the model overseas; today’s interims demonstrate that the UK model is proven, resilient and cash generative. We have trimmed our revenue forecasts to reflect changes in the mid-week games portfolio but leave our EBITDA and EPS forecasts unchanged. We retain our 990p share price target implying 141% upside.

[jackson83] 06/2/2023 14:59

someone purchased 2000 shares at 569p ..

[pireric] 06/2/2023 14:54

Good spot on the half a million pound competition offer. My reading would be the same. Still on less than 10 times cash adjusted earnings so this does feel like valuation is only really normalising back up to reasonable levels. And id flag again the marketing costs hopefully continue their downwars trend which gives some scope to beat earnings come April. There has been solid buying activity over the last week or so and a little bit of an overhang that needed shifting (which now seems to have gone). It won't go up in a straight line forever but plenty of reasons valuation benchmarking to the market that this should trade more towards 700p if momentum is sustained into the full year results

Eric

[feverfan] 06/2/2023 14:15

If anyone can explain to me how this stock trades I’ll happily send them a thank you message….it makes no sense! It sits sits sits while people are buy buy buy on massively increased volume then jumps 6%, now 7%, and since writing now 8%?!

[jackson83] 06/2/2023 14:13

I thought a fund purchased a large amount at 2400p some time ago ? Slater maybe thats £24 & now its only in the 5 pounds mark ... seems cheap now

[someuwin] 06/2/2023 11:39

Can buy £5k. But not £6k.

[someuwin] 06/2/2023 10:27

All buys so far today...

[feverfan] 06/2/2023 10:17

Wow, biggest prize ever I think on offer this week. £200/300/400/500k prizes on offer…£13.70 a ticket though for the half mil prize. My gut is the directors wouldn’t do this if they were worried the £500k would mean missing hitting YE forecasts. Will be keeping a close eye on web traffic as guessing they’ll be promoting this reasonably heavily!

On web traffic worth adding, this doesn’t include app sales correct? Which we know is 25% (figure quoted in interim results) and growing of sales, particularly in lifestyle comp where it’s a super quick/slick sales process to buy a ticket as it’s just answer the skill based question…dream car I can see for spot the ball people seem to want the bigger screen pixels. So presumably over time this data set becomes less and less relevant to predicting revenue

[pireric] 04/2/2023 21:16

Yes think it's a US tracker, though the US at the moment is going to be in a far better overall economic position than the UK and maybe that reflects in CPMs

My guess for January's traffic count based on Similarweb is now 1.385 - 1.39m. Hopefully ends up being somewhat accurate as that would be a good reading for January.

Eric

[feverfan] 03/2/2023 21:28

Thanks Eric. Looks like it’s US only though? Assuming trends follow the same profile here…it would align to the commentary from CEO that marketing costs were starting to return to pre pandemic levels - it’s quite a fascinating story to see how high they went in 2021! Here’s hoping they stay down…

Another good week for prize costs. Dream car winner was the cheapest car on the lineup! £10k Friday fun £36k midweek £47k dream car so £93k. Average costs for earlier months when I calculated on a previous post were £140kish.

[dan_the_epic] 03/2/2023 16:32

No ESG prizes

[someuwin] 03/2/2023 16:25

BOTB Worth a punt as a recovery play at this level imo.

[feverfan] 01/2/2023 18:38

Very interesting thank you all! The drop off in 2022 coincides perfectly with the May ish drop of the Midweek competition where they merged it with the lifestyle. Finncap said that would cost £4m this year in revenue so it makes sense to drop off. 1.3m ish therefore looks like the new baseline and figures above that to me point to growth. The above would suggest growth in Nov/Dec Vs H1 rates. To meet forecast of £28m they need to deliver £14.35m Vs H1 £13.65m. 5% growth over H1.

[serratia] 01/2/2023 18:26

Jan 22 1500, Feb 22 1500, Jun 22 1300

[doctor888] 01/2/2023 17:25

@feverfan @pireric

I have monthly data from Feb-20 onwards except Jan-22, Feb-22 and Jun-22

data from Feb-20 to Dec-20 from @feverfan (thanks!)
data from Jul-22 to Sep-22 from @pireric (thanks!)

if anyone has any more data, please share...

Feb-20 1 0.7
Mar-20 2 0.86
Apr-20 3 0.91
May-20 4 1.85
Jun-20 5 1.8
Jul-20 6 2.2
Aug-20 7 2.8
Sep-20 8 2.3
Oct-20 9 1.85
Nov-20 10 1.95
Dec-20 11 2.15
Jan-21 12 1.75
Feb-21 13 1.6
Mar-21 14 1.85
Apr-21 15 1.7
May-21 16 1.8
Jun-21 17 1.6
Jul-21 18 1.65
Aug-21 19 1.7
Sep-21 20 1.55
Oct-21 21 1.4
Nov-21 22 1.35
Dec-21 23 1.65
Jan-22 24
Feb-22 25
Mar-22 26 1.8
Apr-22 27 1.8
May-22 28 1.7
Jun-22 29
Jul-22 30 1.314
Aug-22 31 1.353
Sep-22 32 1.322
Oct-22 33 1.3
Nov-22 34 1.4
Dec-22 35 1.5

[pireric] 01/2/2023 09:24

Unfortunately only a spot rounded number that January/February 2020 pre-covid were around 650k-700k per month

Eric

[feverfan] 01/2/2023 09:17

Thanks Eric. Do you have the pre-covid / covid era massive growth figures still? I was trying to see how these compared for interest. The comment I that I found most interesting in the update was that CPMs for Meta were returning to pre-covid levels - that’s a massive margin tailwind if it stays that way.

December seasonality feels reasonable given Christmas / people spending happily / wanting to win their dream car. Jan similarly feels fair to be slightly lower as you’d expect people tighten their belts a little.