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.
