Super Group Could Repurchase Stock, Africa Remains Growth Story

Super Group (NYSE: SGHC) could consider buying back its own stock over the coming quarters, something one analyst believes would be a spark for the shares.

In a new report to clients, Citizens Equity Research analyst Jordan Bender says he recently met with executives from the gaming company, adding that share repurchases were a topic of discussion. Citing a growing cash balance ($548 million at the end of the second quarter) and the company having no debt, Bender believes the Betway parent is an ideal candidate to buy back stock. He adds that previously announced repurchase programs by other online gaming companies, including DraftKings (NASDAQ: DKNG) and Rush Street Interactive (NYSE: RSI), could serve as playbooks for Super Group to follow suit.

Super Group pays a quarterly dividend — a rarity in the online gaming industry — and has delivered three special payouts over the past several years. The stock yields 1.45%. Bender rates the stock “market perform” with a $19 price target.

Super Group iGaming Focus Could Pay Off

As is the case with a small number of other operators in the industry, Super Group deploys an iGaming-first model — one that investors have previously embraced.

Super Group’s two primary brands are Betway and Spin, which have iGaming revenue mixes of 66% and 100%, respectively. That means 80% of the operator’s top line is derived from internet casinos, the highest percentage in its peer group.

Super Group’s iGaming focus is material for long-term investors because that form of wagering is higher margin and requires less promotional investment than online sports betting. Additionally, internet casino bettors typically spend more and are stickier customers than their sports betting counterparts.

“iGaming-first operators have found iGaming customers to be significantly more valuable vs. sports bettors, boding well for the outlook of the company, as we believe iGaming will continue to be the driver of revenue moving forward,” adds Bender.

Super Group Africa Angles

Though it does business in Canada, Super Group departed the U.S. iGaming market last year, about a year after it exited the online sports wagering market here. Those moves allowed the operator to realize cost savings while focusing on other regions, including Africa.

That continent accounted for 45% of the company’s first half revenue, up from 34% a year earlier. Super Group currently does business in eight African nations and typically realizes rapid paybacks on minimal investments there, meaning a fourth-quarter launch in Namibia and a potential further-out debut in Kenya could be longer-ranging catalysts for the stock.

“The company has historically made prudent decisions around entering or exiting markets as operating environments change, and these new launches suggest management has a clear line of sight to profitable growth over the coming years,” concludes Bender. “Overall, Africa’s revenue mix could approach 60% by 2028, which carries a higher earnings before interest, taxes, depreciation and amortization (EBITDA) margin (36% in trailing 12 months) compared with the remainder of the business, an underappreciated aspect of the free cash flow story, in our view.”