“How to value this?
Tabcorp, offering limited growth, trades at roughly 12x EV/EBITDA. Flutter (no doubt influenced by its exposure to the US gaming market) trades at 18x EV/EBITDA, and both companies offer some valuation benchmarks.
We also need to adjust for the cost to acquire a 5 per cent or 10 per cent share when calculating our EV and convert the valuation scenarios to $AUD.
Valuation of 5 per cent/10 per cent market share at 12x EBITDA in $AUD terms.
A structural growth opportunity
PointsBet Holdings today ($4.77 per share) has an enterprise value (EV) of A$629 million, highlighting considerable scope for upside should management execute on the opportunity, and if greater than 50 per cent of the US market eventually opens up to online sports betting.
In our view PointsBet Holdings is a challenger, it has a competitive product offering (technology) and marketing skills leveraging its experience in operating in the competitive Australian online sports betting market into the rapidly growing US online sports betting market that looks set for many years of structural growth.
It’s too early to tell what levels of success PointsBet Holdings may or may not enjoy. And if they don’t execute in the US market, there is considerable downside to the share price. However, as we can see from the table above, there is also scope and potential for the shares to double and more.”
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