Gambling your hard earned money on sports, poker or the races is not a wise investment. Because the odds are stacked against you.
However, investing in betting companies with healthy financials, large market share and upside potential seems the smarter decision. It’s like the phrase “Never buy McDonald’s just buy their stock”. Gambling is not condoned but investing in betting companies can turn the odds in your favour.
Today we will discuss Points Bet Holdings Ltd (ASX: PBH). PBH is a corporate bookmaker, much like your Ladbrokes or Sports Bet, with operations in Australia and America. PBH offers Fixed Odds Sports, Fixed Odds Racing and Points Betting.
Why have Points bet Holdings Ltd surged by 174% in 8 months?
PBH started with an IPO of $2 (June 2019) but after 8 months the share price soared by 174% to $6.08 (22nd January 2020).
Price sensitive event one (PSE): Sports betting is legalised in America – May 2018
Sports betting was illegal in America. Until the 2018 amendment of the Professional and Amateur Sports Protection Act of 1992 . Individual states can now distribute licenses and collect additional taxpayer’s money.
In turn, PBH entered the American market and boy have they made their entrance known. PointsBet Holdings is operating in Iowa, New Jersey, Michigan, New York, Colorado, Illinois and many more.
PSE two: PBH receives LLC license from the Iowa Racing and Gaming Commission – the 19th August 2019
Investors saw PBH’s Iowa license as a representation of revenue growth and an increase in market share. In turn, every time PBH announces a new license their share price Increases. Thus, making any new license a PSE.
PSE three: Strategic Alliance between Betmakers Technology Group Ltd – PointsBet Holdings Ltd – 16th September 2019
Betmakers Technology Group Ltd streams 2000 international races each week. Betmakers live racing channel and pricing technology is integrated in Points Bet Holdings. The strategic alliance increases PBH’s potential revenue in the racing market. Investors saw the strategic alliance as yet another key date that PBH cemented their market advantage.
PSE four: PBH’s $122 million Capital raising – 22nd November 2019
First, PBH D/E ratio is –101.85%. Yes, that is right –101.85%. If your eyes are not popping out of your eyes, I don’t know what will. PBH’s equity is $74.51 million equity (June 2019) and is debt-free.
Moreover, PBH previously acquired $21.44 million debt in 2018. Illustrating how PBH can not only service debt but use it to significantly increase business success. Providing investors with ease if PBH decides to take on future debt.
Furthermore, PBH experienced revenue growth of 173% between June 2018 – 2019. Illustrating that their betting products are effective in generating money for the company.
Despite the eye-watering D/E ratio, we must discuss the negatives (risks). Why? Because YIG believes in providing investors with a balanced perspective on stocks. Especially stocks that allure investors through promises on future growth.
PBH is unprofitable. PBH earnings over the past year decreased by 720% (-6.66 million to – $41.89 million). The decrease should send a shiver down your spine.
Instantly, the smart investor should discard unprofitable stocks. However, Tesla was unprofitable for a long time and look at it now.
PBH spent $24.9 million on advertising and brand sponsorship deals which resulted in the 720% decrease.
Is it too late to Jump on the PBH train?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
The short answer is maybe not.
PBH’s entrance into the American market, since legislation, is impressive. PBH own more than 5% of the available market. Thus, despite future competitors, PBH has the first-mover advantage.
PBH is forecasted to significantly grow market share throughout 2020. The more licenses PBH acquires the more revenue and the share price will grow.
PBH is still in its infancy. Meaning the 174% growth in the share price to $6 is representative of the early stages. Moreover, Regal Funds management Ltd invested 28 million into PBH on 3rd November 2019 at $4.46. Lastly, it is speculated that PBH is the stock Motley Fool have $221,000 riding on.
Obviously, undertake additional research on understanding how the company makes money before investing. If you found this article interesting then read our analysis on:
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin, Associate of YIG.