PointsBet Holdings Limited

PBH’s Stock surged over 16% post partnership with Penn National Gaming Inc., USA: PointsBet Holdings Limited (ASX: PBH) is involved in offering all traditional fixed odds markets, i.e., sports & racing along with providing sports betting format where winnings or losses aren’t fixed but depend on how to correct one bets.

The company recently announced that its wholly-owned subsidiary, PointsBet USA Inc. and Penn National Gaming Inc. have entered into an agreement for digital sports betting and gaming services in the United States. Under the agreement, PNG has granted PointsBet the right to develop, own, market and operate, under the authority of the PNG’s operating licenses, PointsBet branded online sportsbook and gaming operations in Ohio, Indiana, Missouri, West Virginia and Louisiana, subject to enabling legislation and licensure in each of those States. Moreover, PNG has granted PointsBet a right of the first offer for any new market access points, which is not currently committed by PNG to any third party.
Sports betting has been legalised in West Virginia and Indiana and subject to regulatory approvals thereby, PBH looks forward for being operational in those states as soon as possible. As per the agreement, Penn Interactive Ventures, LLC, a wholly-owned subsidiary of PNG, will be issued 6,127,451 new fully paid ordinary shares in the Company which is equivalent to a 5.28% stake. The Company will also issue PNG 10,372,549 options exercisable at $4.75 per option on or before 12 September 2021. If all the options are exercised, the Company will receive further funding of approximately $49.27 million.

In its Investors’ update, PBH highlighted that its turnover for FY19 increased by 244% to $567 Mn as compared to $165 Mn in FY18.Its net revenue in FY19 increased by 172% to $25.6 Mn as compared to $9.4 Mn in FY18. Its registered clients in FY19 increased by 254% to 123,180 as compared to 34,779.


Key Performance Metrics (Source: Company Reports)

June ’19 Quarter Key Highlights: PBH accepted more than 1 Mn bets in each month of April, May, and June 2019. It increased its online turnover market share in New Jersey to 5.4% in June 2019, as compared to 2.2% in February 2019. In June 2019, it successfully raised $75 Mn via an IPO. At the end of the June quarter, its cash and cash equivalents were reported at $75.90 Mn.


June ’19 Quarter Operating Cash Flow (Source: Company Reports)

What to expect: PointsBet anticipates that it will begin accepting bets in Illinois at some point during the upcoming 2019/20 NFL season and in Iowa, where it announced a market access partnership in April 2019. On July 1, 2019, PointsBet announced Hawthorne Racecourse as its market access partner in Illinois. Hawthorne is near downtown Chicago, the third largest urban area in the country. In addition, PointsBet will outfit and operate sportsbooks at three select OTB locations in Chicago. Hawthorne is PointsBet’s fourth market access agreement in the US, following New Jersey, Colorado and Iowa, in addition to a second skin agreement to operate in New York.

Stock Recommendation: PBH’s shares generated positive one month return of 14.17%. Its gross margin for H1FY19 stands at 57.1%, better than the industry median of 55.6%. On the technical analysis front, PBH’s share is trading in the overbought region of the Relative Strength Index (14 days), which points to the weakening buyers’ strength. Hence, considering the aforesaid facts and current trading level, we suggest investors to have a watch stance on the stock at the current market price of $3.390, up 16.897% on August 1, 2019 (stock zoomed on the news related to the partnership with Penn National Gaming to secure market access in 5 states), and wait for better entry levels.

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