Enlabs has today finalized the acquisition of KDB Games, a land-based operator in Belarus. KDB Games seem to be an optimal acquisition as it is small but still fulfill the requirements to obtain an online license in Belarus. We are confident that this is the case as Enlabs has made a very thorough due diligence, especially taking into account how much time the company has spent in relation to the size of the acquisition. Enlabs also communicated that it expects to launch its flagship brand, Optibet, in H1 2020.
With this acquisition, Enlabs has greatly expanded its addressable market. Based on local gaming taxation data for land-based operations the estimated total market size is around EUR 500m, as illustrated in the graph below. The size of the online-based operations is estimated to around 5-10% of the land-based size. The online numbers are, however, very uncertain and we believe the online market can be much larger. With a population of 9.5 million, the population is about three times as large as the population in Enlabs existing core markets, Latvia and Estonia.
According to Digital 2019, 74% of the adult Belarusian population are internet users, and 61% are mobile internet users, as illustrated in the graph below. Moreover, about half of the adult population are used to make online payments and purchases. The GDP per capita is, however, low and the GDP growth is not explosive. Nevertheless, we believe that the Belarusian gambling market has all the prerequisites for rapid online growth, and the online market is expected to grow 25% annually.
The market also has some barriers to entry that should limit the number of licensed competitors:
Moreover, the Belarusian authorities will block all unlicensed operators from the 1st of April 2021. Furthermore, from this date, all the licensed operators will have to pay 4% in gaming tax on GGR.
We expect that the Belarusian market will become a major growth driver for Enlabs but that it will take until 2021 before it makes any major impact on the group´s overall growth. The expansion will, however, show the scalability of the business as the company only needs to make a few additions to the support team to offer a competitive product. Furthermore, adding the low gaming tax of 4%, we expect that the contribution from the Belarusian operations to the group´s profit will be substantial. All in all, the acquisition and expansion into Belarus increases our confidence in the case.
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