The US sports betting market has made these small caps multi-baggers, is there more to come?
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As their names suggest they are in the punting business but despite being ASX-listed their major focus has been the America market.
Back in June we spoke with Ron Shamgar, head of equity strategies at TAMIM Asset Management. He labelled the market a “once in a lifetime opportunity”.
He told us: “If they [PointsBet] get it right, then you could make 5x or 10x your money. It’s a huge opportunity. Sort of like a once in a lifetime event.”
His words “once in a lifetime event” could make you think Americans had never heard of punting before and it was a brand new market.
Not exactly. Americans do bet but much of it occurs through illegal offshore bookies. Yet by legalising sports betting this incentives bookies to be local and advantages companies with a specific US focus.
Nearly eight months since PointsBet listed, it is the 57th best gainer on the ASX in that time. Meanwhile, BetMakers is the 4th.
But is the run over or is it only just getting started? Once again, we spoke with TAMIM’s Shamgar and he believes there is more to come.
“The US sports betting market will continue to grow as each state legislates its own laws,” he said.
“We expect PointsBet to announce more market access deals in additional states and more importantly, accelerate their roll out of launching into the states they have already secured. These include Illinois, Indiana, Michigan and Kansas.”
Shamgar expects the most populous states will be the most lucrative.
“Although PointsBet has a market access deal in New York, the proposed legislative change to allow mobile betting will be a huge opportunity for them,” he said.
“Some other lucrative states that have yet to legislate but we are confident will eventually do, are California and Florida.
“In the long run we see the majority of all US states legislating favourably as they see their neighbouring states rake in tax revenue and bring illegal offshore betting under control.”
Stockhead also attempted unsuccessfully to contact Betmakers for comment.
But when Betmakers unveiled its latest deal, CEO Todd Buckingham said more growth was to come from his company and the market. He was particularly bullish about the horse racing segment.
“There is a real opportunity for the US horse racing market to grow like it has in Australia, which has seen prize money levels double over the past seven to 10 years based on a funding model that is equitable to all participants,” he said.
While TAMIM does not own any Betmakers shares it has been watching the stock closely and believes it and PointsBet have risen for the same reasons.
“Both PointsBet and Betmakers have done well since due to both succeeding to penetrate the US market through partnerships and market access deals,” Shamgar said.
“In the case of PointsBet, over the last six months it has signed deals that give it access to 12 states in the US and a total population of 100 million people.
“In New Jersey it has established itself as the number three sports betting book maker with 6.5 per cent market share.
“Betmakers has performed well as they signed new partnerships in the US racetrack market and a large gaming client in GVC Plc — Betmakers offers race track technology solutions to bookmakers.
“Both PointsBet and Betmakers should continue to benefit as investors understand the US market is an enormous and emerging opportunity in the making.”