Pointsbet Holdings Limited (PBH)
BUY

Third and long

 28 Feb 2023
Sector: Consumer Discretionary

1H23 RESULT

Need To Know

  • 1H23 net revenue $178.1m +28% y/y, in-line with market, EBITDA loss -$149.1m, below market 
  • (-$134m)
  • 2H22 EBITDA guidance is for loss to halve as opex and marketing reduce
  • EBITDA and cash flow positive by FY26f

The long and arduous task of establishing a meaningful sportsbetting and iGaming business in the USA is testing the patience of investors. Pointsbet is expecting second half losses to halve as it eases back on its own expenditure. This could be the first sign of better financial reports to come.

Result. Turnover in North America increased 66% to A$1.57bn boosting trading revenue to A$75m +86% on pcp. Australian turnover increased 14% to A$1.55bn for trading revenue of A$95.3m -2% on pcp. Group normalised EBITDA loss of A$149.1m was flat on last year (adjusting for share-based payments).

PBH had a cash balance of $387.2m at 31 December 2022 which is sufficient to continue developing its business. 

PBH is expecting 2H22 EBITDA loss to be between -$77m and -$82m, compared to the 1H23 loss of -$149.1m.

Investment View

As we hoped, live betting is the killer app for PBH. In 1H23, 56% of total handle was live betting and this will grow quickly. PBH’s sophisticated platform is capable of enhancing the customer’s sports betting experience and its partnership with NBC Universal is a key factor in establishing PBH’s reputation in the industry. For much of the last year, PBH has focused on gaining licences (now in 15 states) and getting operations off the ground in as many states as possible where sports betting has been made legal in the USA. New York and Illinois are among the largest so far, but other states are still contemplating the same legalisation of online sports betting such as California. PBH has reached a point where it no longer needs to be in every state and has withdrawn its Massachusetts licence application.

PBH is a credible participant in the huge but nascent North American online sportsbetting industry. Considering the maturity of every other aspect of professional sports in the US, it will not take too long for sportsbetting to catch up and become a mainstream part of the sporting ethos. The sophistication of PBH’s platform and systems will give it an edge. PBH has partnered with high quality organisations who have taken stakes in PBH reflecting the mutual benefit each sees in what PBH is doing.

PBH does not have to chuck a Hail Mary at this point, but at third and long, we think it can make the next first down. 

Figure 1: 1H23 STATUTORY RESULT

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Stock Overview

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Company Overview

PointsBet is a corporate bookmaker with a scalable cloud-based wagering platform for sports betting and iGaming. It has operations in Australia, USA, Canada and Ireland.

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