ASX All Ords stock PointsBet Holdings Ltd (ASX: PBH) is in the red this year after a brutal sell-off way back in May.
Despite an attempted comeback rally last month, where shares jumped from 48 cents to highs of 73.5 cents apiece on September 26, the stock has tracked sideways since.
But according to one asset manager, the sports betting and iGaming company's recent strategic decisions and core technology make it an attractive acquisition target.
Here's why it sees value in PointsBet's assets and growth trajectory.
ASX All Ords stock potential takeover target
Despite the ASX All Ords stock's underperformance this year, TAMIM Asset Management sees the company as a ripe takeover candidate.
Several factors play directly into the investment thesis. But there are further tailwinds that might be bullish for PointsBet itself, the firm says.
PointsBet presents as an attractive takeover opportunity due to its strong market position, proprietary technology, and trajectory toward profitability. Its established presence in the regulated markets of Australia and Canada, coupled with its continued projection to scale makes it a prospect for both industry incumbents and new entrants.
As PointsBet transitions to sustainable profitability with improved operating earnings and strong revenue growth, its attractiveness to potential acquirers grows.
The sports betting industry has been marked by significant mergers and acquisitions. Emerging challengers, such as Betr, or even crypto and online gaming operators like Stake, may view PointsBet as a critical asset to expand their product offerings and strengthen their competitive positions.
The fund manager views PointsBet as a strong player in the regulated markets of Australia and Canada.
This is thanks largely to its unique, proprietary tech assets like the "Odds Factory" platform.
PointsBet has demonstrated strong revenue growth and improving profitability, exemplified by its scalable, cloud-based wagering platform that offers advanced sports and racing wagering products, along with iGaming and advanced deposit wagering on racing.
TAMIM also emphasised the ASX All Ords stock's exit from the US market was a strategic move. The sale, made through a US$225 million sale to Fanatics, was "pivotal" for the gaming company.
A recent significant development for PointsBet was the sale of its U.S. business to Fanatics for US$225 million. This transaction was completed after an intensive and competitive process, culminating in the return of AUD $442.4 million to shareholders, equivalent to A$1.39 per share.
The sale marked a pivotal restructuring phase for PointsBet, with the company retaining ownership of its core technology. This proprietary tech remains a key asset as PointsBet focuses on expanding its Australian market share and growing its Canadian operations.
What about PointsBet's fundamentals?
Aside from the growth opportunity, the fund manager also mentioned the ASX All Ords stock's actual financial results as a tailwind.
It noted PoinstBet's growth percentages in FY24, where operating earnings jumped to $27 million from $0.1 million the year prior.
In Canada, PointsBet grew revenue by 87% on a tighter operating loss. Moving forward, TAMIM sees plenty of upside in the nation.
PointsBet showed further improvement in the Canadian market. Revenue grew 87% and the company's operating loss narrowed to $19.7 million from $35.8 million the prior year…
…Management are forecasting Canada to breakeven by FY25 year end.
Moving forward, TAMIM says the Canadian market offers "significant growth potential" for the ASX All Ords share.
Whereas here in Australia, it expects just under $300 million in sales in FY25, pulling this to around $16 million at the upper end of guidance.
Time will tell whether or not the company converts on its Canadian opportunity.
Nevertheless, the firm says it is well-positioned for future growth, with around $20 million in net assets and $28 million in cash.
PointsBet was also rated a buy from Bell Potter in August.
Foolish takeout
TAMIM Asset Management suggests this ASX All Ords stock is a prime takeover candidate. It likes the innovative tech and established market position, which could attract both established players and emerging entrants.
The stock has slipped 3% in the last 12 months. In January 2021, it hit a high of $15.15 per share.
