By Helena Soderpalm
STOCKHOLM, May 26 (Reuters) - Swedish gambling technology
company Evolution is betting online casinos will
increasingly replace physical venues and help to maintain its
rapid recent expansion.
Evolution shares have jumped 170% over the past year,
boosted by growing demand for online casinos during lockdowns,
pushing its market value up to 314 billion crowns ($38 billion)
compared with less than 3 billion when it listed in 2015.
That puts the firm, which produces and licenses live casinos
to gaming operators, among Sweden's 10 biggest listed companies
along with the likes of telecoms equipment maker Ericsson
, which has a 367 billion crown market value.
Evolution, which has more than 500 customers including 888
Casino and Betsson, bought Swedish rival
NetEnt for $2.12 billion last year, handing it popular slot
games such as Starburst and Piggy Riches.
Chief Executive Martin Carlesund said Evolution could buy
companies anywhere as it plans to be present in all regulated
gambling markets, though it was not aiming to drive
consolidation in the industry.
"The market as such will double and double again. It's
almost hard to grasp the potential that there is," Carlesund
said, adding that physical casinos would provide "perhaps 50, 40
or 30%" or less of total casino revenues in 15 years.
Industry data provider H2 Gambling Capital (H2GC) said that
extrapolating growth forecasts out to 2036 would see the casino
market expand by about 90% to 231 billion euros ($283 billion),
with online gambling accounting for 22% of overall revenue
versus 16% in 2021.
H2GC senior consultant Ed Birkin would not rule out that
online casinos could make up 50% of the market within 15 years,
as structural shifts could make current growth rates irrelevant.
"But based on current levels of growth and relative market
size, you would have to assume a significant increase in growth
in online along with a significant decline in land-based to
achieve this," Birkin said.
INNOVATION KEY
With U.S. and Asian markets at an early stage, Evolution,
whose first-quarter sales leapt more than 100% to 236 million
euros, will keep growing fast, said analyst Marlon Varnik at
Pareto, which has a buy recommendation on Evolution shares.
Competitors catching up, political risks and key people in
innovation leaving were potential risks ahead, Varnik said,
although Evolution was extending its lead for now.
"Innovation is a very important factor as to why Evolution
has been so successful with its games," he said.
Rivals include London-listed Playtech, while
Evolution's Carlesund said the Swedish firm also competes with
Netflix and other net-based entertainment providers.
Playtech said on Wednesday that its online growth had been
very strong in the first four months of 2021 and it was ahead of
its forecasts for operating profit.
Carlesund said Evolution could well beat its forecast for an
operating (EBITDA) margin of 65% this year and that he expected
many more U.S. states to become regulated markets for online
gambling in 10 to 15 years.
"We'll be a bit like Google was in 1999: if you're in this
business you should be in Evolution," he said.
($1 = 8.2591 Swedish crowns)
($1 = 0.8167 euros)
(Reporting by Helena Soderpalm; Editing by David Clarke)
888 Holdings (888)
Playtech (PTEC)