Better Collective A/S : Impressive growth trajectory

The results for the first quarter of the year confirm it: revenues are up 30% compared to the same time last year, of which 23% organically, while the operating margin remains solidly anchored at around 30%-40%.

This unusual profitability for a media group is made possible by the lower cost of editorial staff - it can easily recruit inexperienced writers to comment on sports news - and the fact that the company has a large number of employees. This unusual profitability for a media group is made possible by the lower cost of editorial labor - it can easily recruit inexperienced writers to comment on sports news - and the generous commissions paid by online betting platforms, which rely on Better Collective to direct its readership towards them.

In ten years, the group has gone from almost zero to EUR 300 million in revenue. It now claims nearly 100 million readers through its various franchises such as SoccerNews, Futbin and VegasInsider.

Despite impressive pre-amortization operating profits - or EBITDA, i.e. operating profits adjusted for the cost of investments - Better Collective has not been able to increase its revenues. Better Collective has yet to demonstrate its ability to generate sustainable free cash flow.

The company's impressive annualized growth rate of 46% over the past decade has been largely driven by acquisitions, which the company has relied on capital increases to finance due to insufficient profits. The good news, let's face it, is that these external growth investments seem to have been very well integrated.

The question with this type of model is always whether the pace of growth is sustainable without acquisitions, and whether, on a like-for-like basis, the operations can remain profitable and generate profits that can be redistributed to shareholders.

If one chooses to refer to EBITDA multiples alone - an approach that makes sense given that Better Collective represents an obvious acquisition target - the current valuation of only x11 EBITDA expected in 2023 and x9 EBITDA projected for next year is lower than the historical average valuation of the group, which oscillates between x10 and x15 EBITDA.

These elements deserve the attention of investors familiar with the online betting sector. As for the shareholding, we note that the two founders of the group - who jointly control 40% of the capital - have not sold any shares in recent quarters.