The ASX share Pointsbet Holdings Ltd (ASX: PBH) has had an incredible last six months, rising 111%. However, despite that, it's still down more than 90% from February 2021. Hence, ASX share investors may be wondering if the business has more fuel to keep rising.
Pointsbet describes itself as a corporate bookmaker listed on the ASX with operations in Australia and Canada. It has a cloud-based wagering platform where clients can use sports and racing wagering products and iGaming.
Despite the huge decline, the investment team at Wilson Asset Management (WAM) see an opportunity with this business.
It's not as big as it was – the corporate bookmaker now has a market capitalisation of just over $300 million, according to the ASX. That's why the ASX share attracted the investment dollars of WAM Microcap Limited (ASX: WMI), a listed investment company (LIC) that aims to target the "most exciting undervalued growth opportunities in the Australian micro-cap market."
Let's have a look at why the fund manager likes this business.
Bull case for the ASX share
The WAM team point out that Pointsbet's quarterly update for the three months to September 2024 delivered revenue growth across Australia and Canada.
According to the fund manager, the Australian business delivered 7% growth in net wins during the quarter due to market share gains, a richer product mix, and more efficient promotional spending.
WAM said the Canadian business performed well, reporting strong growth in sports wagering and iGaming net wins, with increases of 77% and 50%, respectively.
Pointsbet's management believes the Canadian business is on track to achieve breakeven cash flow in the financial year.
Overall, the ASX share reported total net win growth of 12% to $65.3 million, with sports betting seeing a 3% rise in turnover to $626.8 million and a 10% increase in net wins. It also revealed a 15% year over year rise in gross profit and a 5% increase in cash active clients to 287,400.
But, Pointsbet did report that its operating cash flow, excluding movement in player cash, was an outflow of $5.6 million.
The investment team thinks the company's focus on leveraging its existing technology and brand marketing spend will "drive further operational leverage in both Australia and Canada".
WAM suggested that if the ASX share's management meets the FY25 target for operating profit (EBITDA) of between $11 million to $16 million, it expects a "positive step-change in Pointsbet Holdings' valuation".
Pointsbet has also guided it's expecting total revenue of between $280 million to $290 million, with both Australia and Canada expected to outperform the market and grow market share.
