Why Pointsbet is a top ASX growth share to buy right now

The continuation of many sports leagues around the world could make Pointsbet Holdings Ltd (ASX: PBH) a compelling ASX growth share to buy in August.

The company has recorded strong growth in the domestic Australian market while securing key partnerships and licenses in the significant US market – amid the coronavirus pandemic. I think its potential revenue growth and strong cash position could make it a top ASX growth share to buy.. 

It’s a strong stand-alone business

In the company’s Q4 FY20 business update, Pointsbet Australia delivered quarter-on-quarter net win growth of 109%. This marks its second consecutive quarter of positive EBITDA.

Its quarter-on-quarter net win margin pushed higher due to favourable results and customer’s transfer from sports to racing. This, combined with the timing and execution of its tier 1 Channel 7 Australian horse racing partnership and Fox Sports AFL, were big drivers of growth this quarter.

I believe Pointsbet Australia is shaping up to be a strong stand-alone business that will enable the company to focus its resources on the prime US opportunity. 

Building US market amid COVID-19 

The US market saw a 12.9% decrease in turnover due to all 4 major US sporting leagues (baseball, basketball, football and hockey) being absent for Q4 FY20. Despite a challenging financial performance, the company has achieved a number of key partnerships and licenses. 

On 31 July, the company announced that its partner, Hawthorne Race Course, has been issued a Master Sports Wagering Licence by the Illinois Gaming Board. These approvals will allow Pointsbet to start retail and online sports betting operations in Illinois. 

On 5 August, Pointsbet entered into a multi-year agreement to become an Official Sports Gaming Partner of the Indiana Pacers of the NBA. The next day, the company entered into a ‘primary skin’ agreement with the Twin River Management Group to provide online iGaming/online casinos in the State of New Jersey. This could see Pointsbet providing table game, slot content and Live Dealer casino solutions. 

I believe these partnerships and regulatory approvals serve as a springboard for its growth when sporting markets pick up.

Foolish Takeaway

Pointsbet is in a strong position to pounce at the formidable US growth opportunity. The company is well-capitalised with A$135.4m of corporate cash as at 30 June and no debt. Forthcoming launches of sportsbook operations in Illinois, Colorado and Michigan combined with the re-launch of big 4 US sports in Q1 FY21 should see an improved performance moving forward.

While Pointsbet is a higher risk/reward investment opportunity, I think its strong cash position and foothold in the US market makes it a strong ASX growth share to watch. 

More reading

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• Pointsbet share price on watch after ANOTHER new partnership
• Pointsbet share price edges higher on new market opportunity
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• PointsBet share price jumps 4% on new US deal

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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