AGTech revenue doubles as China lottery market outpaces global growth

TAGs: AGTech, China, Lottery, Lucky Racing, sports lottery

agtech-china-lotteryIncreased costs and administrative expenses resulted in a HK$32.9m (US $4.2m) loss in 2012 for Hong Kong-listed lottery tech and hardware provider AGTech Holdings. However, the company is choosing to focus on the fact that it more than doubled its revenue to HK$229.3m over the same period, thanks in large part to the December 2011 acquisition of sports lottery terminal and system provider Beijing Greatwall GOT (since rebranded as Beijing AGTech GOT Technology), which supplies more than half of China’s lottery and sports betting terminals. AGTech also closed out the year by inking its first international lottery hardware sale with South African horseracing outfit Gold Circle Ltd.

Lucky Racing, AGTech’s virtual sports betting co-venture with UK bookies Ladbrokes (under the banner of Asia Gaming Technologies Ltd.), completed its test run in China’s Hunan province in 2012, generating sales of RMB 1.1b ($177m) from its installed base of just under 1,500 shops. AGTech hopes to commence its rollout of the virtual car-racing product on a national basis in 2013 and is negotiating with another large Chinese province on the launch of a second fixed-odds sports betting game. AGTech is also hoping to reap “enormous” benefits from offering Lucky Racing over internet and mobile systems via its telecom/internet service provider subsidiary Shenzhen Silvercreek Digital Technology, assuming Chinese authorities give their okay.

AGTech CEO John Sun believes online lotteries will help broaden the lottery’s appeal beyond its traditional low-income base. Sun told attendees at the recent iGaming Asia Congress in Macau that lottery penetration rate in China was around 8%, but online and mobile betting options would help attract “middle class and white-collar customers.” Sun said Chinese betting shops were “not up to international standards,” and “nice, attractive, international content and systems” were necessary to appeal to higher income consumers.

China’s lottery market grew significantly in 2012, with Sports Lottery sales up 17.8% to RMB 110.5b (US $17.8b) and Welfare Lottery sales up 18.2%. Each figure is more than double the global growth average of 7.7%, according to figures released by the World Lottery Association. This week, China’s Ministry of Finance released tallies for the first two months of 2013, which showed Welfare Lottery sales up 13.5% over the same period in 2012, and Sports Lottery up 14.2%. Combined sales were up 13.8% to RMB 41.724b ($6.7b). The first two months of the year were a study in contrast, with combined sales up 51.1% in January but down 16.6% in February. The discrepancy is largely the result of January 2012 having seven fewer working days thanks to the Lunar New Year celebrations, which fell in February this year.

On a province-by-province basis, Guangdong’s 6.3% growth allowed it to regain its #1 position over Jiangsu, where revenue fell 7.7%. Number-three province Shandong recorded 7.3% growth, while two comparatively less developed provinces – Hebei and Zhejiang – battled into the top-five with dramatic growth of 66.1% and 37.8% respectively. In a sign that AGTech is onto a winner, overall video lottery terminal revenue rose 37.5% in the first two months of 2013, while instant ticket sales fell 19.1% (a trend to which Scientific Games can attest).


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