Last week’s Powerball jackpot of R67m would have bought the winner(s) roughly a 20% stake in JSE-listed Goldrush Holdings*, a small gaming hub that holds a meaningful slice of South Africa’s new lottery operator, Sizekhaya.
Goldrush, which also owns electronic bingo terminals (EBTs) and limited-payout machines (LPMs) as well as a small online betting business, carries a market value of about R331m. That might seem on the low side, considering the expected annual Lotto sales of around R7bn and Sizekhaya’s ability to earn a margin of between 3% and 5% on that vibrant churn.
To the casual observer, operating a national lottery would be regarded as a licence to print money. It probably is, but in the case of Goldrush there are a couple of complications that are curbing investor enthusiasm.
First, there is still a legal challenge to the lottery operator. Stressing the technical nature of this challenge, Goldrush executives are confident that even an adverse outcome would not halt the lottery operations and that a “serious economic outcome” is unlikely. A ruling is expected in the next few weeks.
Second, investor sentiment is against JSE-listed gaming counters, which 10 years ago were still firm favourites with punters. Thanks to online betting — with popular and highly addictive aviation crash-and-burn games accounting for the largest (and still growing) slab of the local gaming spend — the market has slapped longer odds on the operators of physical casinos and alternative gaming formats such as LPMs and EBTs.
The JSE’s flagship gaming listings, Sun International and Tsogo Sun, which control more than three-quarters of South Africa’s casino precincts, now trade on earnings multiples and dividend yields that suggest that both companies are firmly ex-growth.
Participation in the local lottery should, on paper, preclude Goldrush from being tagged as an also-ran. Goldrush holds just less than 24% of Sizekhaya, which, despite the legal challenge, went live in June.
The share price has scooted up almost 30% in a month — admittedly off depressed levels and on patchy trading volumes. But the broader market is not yet backing Goldrush as a winning ticket. The group’s AGM last week was a suitably engaging affair, but it did reflect lingering uncertainty about the potential for lottery participation to change the group’s fortunes.
Richard Cheesman, a partner at Urquhart Partners, says gambling stocks sans a strong online offering are poorly rated. Small caps remain out of favour too. “Goldrush sits at the intersection of those two. Add the preference share and fee structure, the transition from holding company accounting to consolidating Goldrush and the lottery litigation, and the rating does not seem that out of kilter, despite appearing rather enticing.”
Cheesman adds that the group’s results to date have not been particularly strong and there is a fair amount of debt. “It is also not entirely clear how the lottery earnings will flow through into the group’s reported results, and the market seems to be in an ‘I’ll believe it when I see it’ mood.”
At the AGM, Goldrush Group CEO Mergan Naidoo reported that Sizekhaya had got off to a brisk start in its first month of operation. “If you look at the previous operators when they took over the lottery, it was pretty much sales tanking in the first six months. Normally the new operation recovers only within six months in terms of getting terminals into the market.”
Naidoo said Sizekhaya already had 5,500-6,000 terminals out in the market. “It’s shown in the revenue figures and from our calculations we have outperformed the best month of [previous lottery operator] Ithuba in the comparative period to end-June. All in all, it was a fantastic rollout.”
Still, it’s probably prudent, at this early stage, for investors not to try to number-crunch potential profits for Goldrush’s share of Sizekhaya’s eight-year operating period. Significantly, Goldrush executives have been reluctant to spit out profit forecasts.
Some investors are cautiously optimistic. Cheesman points out that Goldrush’s financials have largely reflected only the associated start-up costs of the Sizekhaya operation. “We believe the market may be pleasantly surprised as the profitability of this business begins to emerge in future results.”
Keith McLachlan, an analyst at Blue Gem Research, pencilled in some big lottery numbers in a paid-for research note released last week. McLachlan’s three-year forecast sees Sizekhaya generating net profits of R138m, R231m and R276m in the 2027, 2028 and 2029 financial years. He estimates that Goldrush’s share would come in at R61m, R121m and R149m over that period. That tally, ironically, adds up to R331m — roughly the current market value for Goldrush.
But here is the dampener. Goldrush has incurred substantial debt, including coughing up a chunk of the capital required to get the new lottery operations moving. See-through debt at the end of the past financial year stood at R777m and the annual report drew attention to the group’s current liabilities exceeding its current assets by R148.6m.
Goldrush Holdings CEO Jan van Niekerk said the group is in gearing-down mode, adding: “We won’t stop being entrepreneurial, but for the foreseeable future it’s debt reduction.”
The immediate problem is that Goldrush’s sprawling EBT operation — once a dependable and growing cash cow — is taking real strain. Wilhelm Hertzog, a portfolio manager at Rozendal Partners, says the EBT market has come under immense pressure from online betting. He says Goldrush’s EBTs — 4,470 machines spread over 39 premises across six provinces — might no longer be a reliable cash cow. What’s more, Goldrush’s small online betting segment is growing at a slower pace than the market, which is dominated by sports betting giants Hollywoodbets and Betway. Hertzog believes a constrained capital structure might also hamper Goldrush’s ability to deploy capital into new areas of gaming growth. “Until the profits from the lottery licence investment start flowing into the income statement, the market will be reluctant to give Goldrush any credit.”
The group’s smaller LPM business, with terminals located in sports bars or taverns, is still holding its own; after a few drinks, patrons are often tempted into a wager or three. There could be further good news on this front with the National Gambling Board set to raise the minimum LPM bet from R5 to R50 and the payout limit from R500 to R3,000. Naidoo said the new limit structure has passed through the administration process and is now with the government. “But in the gaming industry, ‘imminent’ can mean anything between two and five years.”
The group still took a R586m noncash impairment of its “land-based’ gambling licences in the past financial year. Van Niekerk noted that “bingo is now being run for cash”.
One sprightly segment is Goldrush’s small online betting operation, which grew revenue 22% to R292m in the 2026 financial year with active customers shifting up to 70,000 from 40,000 in financial 2025. While the revenue line looks encouraging, the growth is behind the average for the industry. McLachlan notes that Goldrush’s online growth was organic and margin-disciplined “rather than bought with marketing, which is a deliberate contrast to peers such as Sun International’s SunBet, whose online income rose around 76% but on heavy tech and bonus spend”.
So, what about the proliferation of online betting curbing lottery spend? Van Niekerk said: “It is honestly a little bit early to see the impact of online on the lottery. We have very little to compare to. We are also keen to see and understand that angle. We have tried to build in all the positive and negative impacts to the Lotto and to provide for online impact. Obviously with those assumptions baked in, the economics were still very lucrative.”
The bottom line, said Van Niekerk, is that a good lottery operation should be running at 3%-5% of sales. “That’s the way we modelled the business — a 3% profit after tax margin … 4% if we are efficient.”
Taking a best-case scenario for the lottery investment, the critical question remains whether after eight years the payoff will be enough to cull debt, pay dividends and allow Goldrush to broaden its operational scale for longer-term sustainability.
At the AGM, Charles Boles, founder of Titanium Capital, asked whether Sun International’s abandoned acquisition of casino group Peermont offered any opportunities for Goldrush.
Van Niekerk referred to a “hierarchy of opportunities where we have an expected return” — stressing that to buy Peermont, or rather its flagship Emperors Palace casino, would require a “really, really cheap price”. “It’s not a conversation that is happening, though parties are always talking … but we don’t want to borrow [more] money to buy land-based operations. And we won’t use our paper for dealmaking … not at the current valuation.”
Naidoo indicated that Goldrush had capital-light opportunities on the horizon. “After getting the lottery up and running, we can start paying attention to these.”
* The writer holds shares in Goldrush
