Welcome to the monthly newsletter for the Waterhouse VC Fund, where wholesale investors can invest alongside the Waterhouse family in the gambling investments we’re making.

The Fund specialises in gambling assets or businesses that offer services to the gambling industry. We believe these investments have little correlation to the general economy in an industry that has continued to be popular throughout the ages. Our aim is to leverage our unique expertise and existing assets to create high growth opportunities.

Every month we’ll provide our insights into the industry. I hope you find it interesting.

Since inception, the Waterhouse VC Fund is up over 30%. If you would like more information on the Fund, please reply to this email.

The Stars align

Last month, portfolio company Flutter Entertainment reached an agreement to merge with The Stars Group (TSG) in an all-share deal. The combined company will become the world’s largest online betting company, valued at about US$14 billion.

If you've seen the financial news in the past year, you've likely seen investors queue up to get into Australia's high flying startups. Companies that are rapidly expanding and sacrifice profits as they invest for growth and scale.

Often, investors are willing to pay over 15 times current year's revenues for a stake in high-growth businesses.

Data sourced from most recent public filings, The Australian Financial Review and S&P Capital IQ.

The new, bigger Flutter Entertainment will be trading on a much lower valuation even though the company is:

Growing revenue at over 10%
Highly profitable, with over 30% of revenue being converted to earnings
Diversified from both a geographical and product offering standpoint, with a market-leading positions in the U.K., Ireland, Australia, Spain, Italy and Germany
Executing on the huge market opportunity in the U.S. with the dominant FoxBet and FanDuel brands
Forecasting significant cost synergies from the soon-to-complete merger

We see many similarities in the way Flutter Entertainment is executing their strategy in the U.S. to the way they executed with the Sportsbet brand in Australia. We'll expand more on this in a later newsletter.

Gambling is a robust and resilient industry and the new Flutter will be in the dominant position to grow quickly in the burgeoning U.S. market.

If you're interested in exposure to the potential upside of the U.S. gambling market, and would like to participate in the fund, providing you qualify as a wholesale investor, please get in touch.