PBH Analysis

Pointsbet shares have gained massively from the widespread legalization of betting in the USA. With shares already up over 100% in the past year, we think this is just the beginning for the ASX Bookmaker. Here’s why we are taking a massive bet on Pointsbet. Prophet’s PBH Analysis.

PointsBet Shares Price

PointsBet is one of our ASX 200 picks that have rocketed up more than 100% in a year, Full article. PBH shares are now up 119.67% over the last 12-months, more than doubling investor’s money!

Since going public in June at a share price of just $2 their share price has returned 510% to today’s price of $12.20.

We can see that PBH ASX did experience a drop during the ‘COVID Crash’. In retrospect it looks like a minor convenience, however, at the time it was a drop of 82%. Since then the share price has shot up to record highs. From trough to peak there was a gain of 1660% to be made.

Their 52-week range is 4.97-18.13, their current market cap is $2.47 Billion.

What is PointsBet?

PointsBet is an ASX-listed sports wagering operator and iGaming provider, offering sports and racing betting products and services direct to Clients via its scalable cloud-based technology platform.

Founded in 2015, PointsBet has grown rapidly since launching its innovative sports betting product, PointsBetting, in Australia in February 2017.

PointsBet launched operations in the United States in January 2019 and is now operational in Illinois, Michigan, New Jersey, Indiana, Colorado and Iowa, with plans to roll out operations across the United States as access to other State-based sports betting markets open up.

In August 2020, PointsBet announced a transformational five-year media partnership with NBC Universal to become the Official Sports Betting Partner of NBC Sports in the United States. This partnership provides PointsBet with access to leading national and regional television and digital assets, with the largest sports audience of any US media company, accessing over 184 million viewers.

PBH recently appointed Shaquille O’Neal as Australian Brand Ambassador

Their Australian customer base is currently larger with turnovers of $1billion during 1H21, compared to US turnovers of $800M. Although active clients in the US are up 222%.

PBH Analysis: Stealing Market Share

PointsBet has the ambitious goal of achieving a 10% online market share in every state that it enters. It plans on disrupting 18 US states by the end of 2022, and Ontario Canada. PointsBet is now operational in six US states and continues to grow.

PBH Analysis, PBH ASX, Pointsbet ASX, Pointsbet Shares, PBH Shares
PBH Analysis, Market Shares

Recently they launched sports wagering operations in Michigan in January and the inaugural iGaming launch in Michigan is imminent, to be followed by New Jersey. Last month, in June, they also won the state of Maryland to launch online and retail sports wagering.

The US sports wagering and iGaming market opportunity for PBH over the term of the NBC Universal partnership to 2025 is predicted to be worth at least US$12.1 billion of annual revenue.

If these numbers hold true we could expect to see a 1412.5% increase in US revenue alone over the next 4 years.

PBH Analysis: Fundamentals

Since PBH ASX is a rapidly growing, not-yet profitable company, traditional Fundamental Analysis can’t fully portray the entire picture. We can see in their fundamentals they have an EPS of -$0.516, currently making a loss.

PointsBet’s share price is backed by $2.16 in net assets. They have a low debt of $73.335 Million which is well covered by cash.

Market Cap$2,470,015,034
Shares Issued207,738,859
ASX Rank168
PE-23.04
EPS-$0.516
Volume 4W Avg720,776
VWAP$12.03
PEG
NTA per Share$2.16
ROE-18.5%
Debt$73.335 Million
Equity$513.173 Million
PBH Analysis: Fundamentals

PBH Analysis: Financials and Growth

From our financial breakdown, we can see net revenue has increased 193.75% between the 2019 and 2020 results. From this data, PBH ASX brought in 75.2 million in revenue. After accounting for overhead company costs, with advertisement and employee expenses being the largest, the company realized a loss in EBITDA of -37.6 million.

Pointsbet ASX balance sheet improved significantly, this was largely due to financial inflows with the company raising capital.

PBH Analysis, PBH ASX, Pointsbet ASX, Pointsbet Shares, PBH Shares, PBH Financials
PBH Analysis Financials

Third-Quarter FY21 Key Metrics

At the end of April Pointsbet released its third-quarter results to the market. We can again see an impressive jump in revenues up 246% from the prior corresponding period. YTD revenues are currently at 147.7 million, before even accounting for the final quarter, FY21 has shown a large jump from FY20 full-year revenues of 75.2 million (up 96% already).

Advertisement expenses have continued to be the largest expense in Q3 with a price tag of $45.1 million as they continue their aggressive marketing campaign.

Key MetricsQ3 FY21Q3 FY20ChangeFY21 YTD
Net Win64.918.8246%147.7
Turnover905.2269.1236%2,795.2
No Active Clients Total285.5k106k169%
Aus158k83.3k90%
USA127.5k22.7k461%
PBH Analysis Q3 FY21 Results

Australia

The Australian business has realized record turnovers and wins. As a result, the Australian segment realized its first half-yearly results with positive cash flow. They boasted an EBITDA of $8 Million.

  • Turnover: $1.71 Billion (up 207%)
  • Net Win: $84.8 Milllion (up 211%)

US

US turnover reaches record heights of $819.1 Million. This segment is still loss-making with an EBITDA of -$69.2 Million.

  • Turnover: $819.1 Million (up 345%)
  • Net Win: -$2 Million

Data from 1H FY21 reports

PBH Analysis Q4 FY21 Results

PBH has highlighted:

  • Strong strategic and operating momentum in Q4 FY21 and FY21 overall in both our Australian and US businesses
  • Successfully completed two strategic acquisitions during Q4 FY21, which accelerates the development of our unique, in-house technology platform and product offering
  • Strong pipeline of growth through H2 CY21 and CY22, with the expectation of launching in 12 US states and Ontario, Canada
  • Capital raising to leverage the established business platform to take advantage of the near-medium term growth pipeline

Across the board, PBH’s numbers were nothing short of impressive, which is what we expected. We saw the group’s turnover increase 182% up to $986.1m during the quarter.

These turnover results have shown the success of their US market, where they have a ‘first movers’ advantage. In the states, we saw a massive increase of 956%. Their US turnover for Q4 was $491.3 Million. This is only set to go higher as the group plans their strategic takeover of 12 more US states, and Ontario Canada by the end of 2022.

Pointsbet Q4, PBH Q4, PBH Results, PBH Analysis
PBH Analysis: Q4 Report

Pointsbets turnovers unsurprisingly came out to solid bottom-line results with the group’s gross and net wins up 128% and 77% respectively representing a net win of $59.3 million. Again the real story was their US results which saw their gross winnings up 1,859%.

We did see the group Australian Net Win margins decrease by 2 basis points, although US margins increased by 0.8 basis points.

Pointsbet Q4, PBH Q4, PBH Results
PBH Analysis: Q4 Report

PBH continues to show strong performances with online handle market share in New Jersey of 7.8%; Illinois of 7.8%; Michigan of 4.9%; Indiana of 5.5%; Colorado of 5.0%; and Iowa of 3.1%. View our entire Q4 Summary here.

PBH Analysis Technicals

The general consensus within the Technical Analysis community is currently Bullish on PBH shares. The moving averages and Technical Indicators seem to indicate a Strong Sell.

Here’s A Breakdown Of The Detailed Technical Factors;

NameValueAction
RSI33.075Sell
STOCH26.923Sell
STOCHRSI4.646Oversold
MACD-0.170Sell
ADX57.646Sell
Williams %R-93.443Oversold
CCI-156.7779Sell
ATR0.1557High Volatility
Highs/Lows-0.1921Sell
Ultimate Oscillator37.126Sell
ROC-2.541Sell
Bull/Bear Power-0.3620Sell
PBH ASX Technical Analysis Source: https://au.investing.com/equities/pointsbet-holdings-ltd-technical

Key Players: Insider Trading and Management

We can see that PBH has a very large insider ownership of 20.8%. This is something we like to see across companies and believe having skin in the game creates excellent incentives for insiders to work towards bettering shareholder outcomes.

We can see the general public holds the majority of the company at 42.5%, while institutions own 26.3%.

PBH Analysis, PBH ASX, Pointsbet ASX, Pointsbet Shares, PBH Shares, PBH Financials, PBH Insider Ownership

Shareholder Distribution:

Holding Size$1-$1,000$1,001-$5000$5,001-$10,000$10,001-$100,000$100,001+Total
Number of Shareholders8,8353,71278173811914,185

As seen in our graphic below there has been a large amount of insider trading activity in PointBet. We are more interested in individual insiders, of which none have traded in 2021. Brett Paton has been the largest individual buying PBH shares. Paton is the non-executive Chairman of PBH. Peter is also a non-executive Chairman, while Fahey is the Chief Commercial Officer COO.

We are don’t see any of these trading activities as red flags.

PBH Analysis, PBH ASX, Pointsbet ASX, Pointsbet Shares, PBH Shares, PBH Financials, PBH Insider trading

CEO Compensation

The current CEO is Sam Swanell who has been in the position for just under two years and has been with the company for over five. He is reported to enjoy a compensation of AU$1,239,860.

Sam Swanell has substantial expertise and experience in the wagering industry, including successfully managing the start-up of both TomWaterhouse.com and PointsBet. For three years, Sam served as National Sales Manager with TOTE Tasmania, responsible for all revenue channels including all retail and pub outlets. During his tenure, turnover and EBITDA increased 200%.

“Sam has a deep understanding of the critical areas required to produce and manage a successful sportsbook, which has been instrumental in the establishment and growth of PointsBet”

Taking a Bet on the Future

PointsBet X NBC

On 28 August 2020, PointsBet and NBCUniversal Media, LLC entered into a five-year media partnership. Under the partnership, PointsBet has become the Official Sports Betting Partner of NBC Sports gaining access to over 184 million viewers. This is the largest sports audience of any US media company.

Under the terms PointsBet receives the following benefits:

  • Exclusive gameday integrations across NBC Sports Regional Networks
  • Exclusive partner of NBC Sports Predictor app, (NBC Sports’ free-to-play games platform)
  • First look rights to sports betting partnership opportunities across new NBC Sports properties, platforms and products
  • Premium placement and agreed pricing structure across NBC Sports television and digital assets

The price:

NBCUniversal has a significant equity subscription with a 4.9% shareholding in the Company and 66.88 million options maturing in five years. ‘

PointsBet’s has also committed marketing spend of US$393 million over the 5-year media partnership.

Brand Deals and Partnerships

Pointsbet has secured a number of high-value partnerships including:

  • Detroit Tigers Major League Baseball (MLB) team
  • Indiana Pacers of the NBA
  • The Denver Nuggets of the NBA, Colorado Avalanche of the NHL, Colorado Mammoth of the National Lacrosse League
  • Colorado Buffaloes
  • Indianapolis Colts NFL franchise and Chicago Bears NFL franchise
  • Shaquille O’Neal, as their Australian brand ambassador
  • Paige Spiranac as a global brand ambassador
  • Official Sports Betting Partner of the NHL

Over the course of a few short years, PointsBet has managed to team up with a number of star athletes and sports teams to create a very strong brand image.

Legalizing Betting

The US sports betting scene continues to mature with the rapid legalization of betting. Currently, there are 21 states that allow online sports betting. There are also an additional six states that have legalized sports betting but are not yet operational and 13 states working towards legalization. 

Pointsbet’s current plan is to acquire 18 US states by the end of 2022.

Canada Gets is also getting closer to the legalization of single-event sports betting, with the country tipped to commence online sports spending in September 2021.

PBH Analysis: Cap Raisings and Placements

Over the past year, total outstanding shares have increased 35.6%. This brings the concern of shareholder dilution. A large portion of this was related to the NBC partnership which we expect to benefit the company significantly.

There have also been a number of retail and institutional bookbuild operations, with the most recent being in September 2020, which raised $353 Million.

With current cash on hand of $144.3 Million, we expect PBH to complete more capital raisings in the coming months to build capital to support their money-hungry marketing campaign, including the commitment of US$393 million over the 5-year agreement with NBC.

PNB Analysis Update: Q4 $400 Million Bookbuild

PBH shares went into a trading halt on the Q4 release date to facilitate a bookbuild. This was an underwritten capital raising of approximately A$400 million with entitlement and institutional offers.

Funds will be used to:

  • North American marketing and client acquisition;
  • Technology and product development (sports betting and iGaming);
  • US market access and government licensing fees;
  • Continued investment in talent and scale of operations; and
  • Balance sheet flexibility.

Prophet’s Take

Pointsbet’s massive US and Australian growth has been unrivaled and is set for further heights. Even at the current results revenues have reached heights, up 96%, this is before even accounting for the final quarter. It goes without saying their full-year reports next month will be a home run.

Over the next four years, Pointsbet is predicted to bring in US$12.1 billion of annual revenue. It will yield from its NBC deal and move to disrupt 18 US states by the end of 2022, achieving a 10% market share in each.

We see massive opportunities for growth for Pointsbet in the upcoming full-year report due next month. We are expecting strong results over the next five years. Because of this, we are taking a position in PointsBet over the coming weeks. Here’s our portfolio

We are extremely BULLISH on PointsBet.

Please Remember all Articles Published on Prophet Invest are Opinion only

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