While the stock has had a positive run, with the company being advised by world-class operators and our projections of the US wagering market to grow to in excess of $US15 billion ($19 billion) over the next five years, we see plenty of value upside should the company continue to successfully execute on its strategy.
Pointsbet has added the NHL to its US partnerships. Is it in a position to lock in a leading position in the American sports betting market?
Yes, we believe so. We measure market share on a state-by-state level in the US as they roll out their platform on a staggered basis.
While we don’t expect them to be the absolute No. 1 across all geographies (given the size of some of their competitors) with the NBC deal, NHL deal and various individual sporting sponsorships we forecast them to achieve up to 10 per cent share across key markets which would imply a strong free cash flow business.
To put some perspective around their growth [Pointsbet] increased its US turnover by 482 per cent in the second quarter, relative to the prior corresponding period, thanks largely to a 222 per cent growth in US active clients over the same time period.
Mineral Resources is a top holding. Do you see lithium making a material contribution to earnings anytime time soon?
Mineral Resources’ management has delivered above and beyond market expectations across its diverse business. While its Wodgina plant is in care and maintenance and its Kemerton plant is in construction phase, its Mount Marion project is producing.
The lithium division is moderately loss-making but as lithium prices improve, which we believe they inevitably will, it could become a very large contributor to group earnings.
At this stage we have not forecast material profits, rather leave it as value optionality.
How’s the outlook for Omni Bridgeway after the lift in regulatory demands on litigation funders and the change in disclosure laws?
Omni Bridgeway is the global leader in litigation funding and we stress global with only 18 per cent (and shrinking) of its portfolio of cases now coming from Australia.
With regard to the increase in regulatory demands, such as litigation funders needing to have an AFSL, this should assist Omni Bridgeway. Less scrupulous litigation funders will either need to lift their game toward Omni Bridgeway’s levels or leave the market.
In terms of the government easing disclosure laws, this is a shrinking part of the Omni Bridgeway’s business and does not impact our valuation.
However, from an Australian investor perspective, we are mystified as to how it is in the best interest of independent shareholders to loosen director and company disclosure rules.
We highly value focussed boards with skin in the game and believe that any loosening of disclosure rules is very much to the detriment of all investors in our share market.
It is still a fluid situation and one we are watching closely but we have confidence in the current management team who have delivered extremely well on their long-term strategy to evolve into a fund’s management style operation.
Uniti Group has built a dominant position in the wholesale fibre-to-the-premises market. Do you expect margins to widen moving forward?
Uniti Group’s long-life fibre assets are ideally positioned to produce organic margin growth.
It has existing fibre in the ground connected to 170,000 active customers. A further 95,000 premises are ready for activation with a pipeline of more than 200,000 contracted agreements where fibre will be installed in the future.
The organic margin growth for Uniti will arrive via three streams.
Firstly, through demand for data as consumption increases. Secondly, via the activation of connections from its existing fibre. And thirdly, expanding its presence as a Retail Service Provider (RSP).
Previously, Uniti provided its fibre assets for other RSP’s to make the connection to the end customer. The group will now offer that connection via its own RSP, affording Uniti the opportunity to capture further margin via the additional value-added services that can be offered.
Any podcasts, reads or shows that have caught your attention recently?
I particularly enjoy Masters in Business by Barry Ritholtz, he often interviews very interesting guests. My most recent download was Joe Rogan’s chat with Elon Musk who is always a fascinating character.
Finally, a recommendation for the readers on a good-value quick bite?
When not in lockdown and working from our CBD office I enjoy The Quarter on Degraves Street which is a uniquely positioned restaurant with a Mediterranean-inspired menu and great coffee.
When working from home I often can be found having dinner at Samurai – a great cheap and cheerful Japanese restaurant on Glenferrie Road.
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