The Match Out: ASX higher for 3rd straight session, Tech leads, is PointsBet (PBH) a takeover target?

James Gerrish

Market Matters

A solid morning session for the ASX with the market peaking +110points higher at midday before the afternoon was filled with sell orders, a +47pt gain a disappointment overall. The IT stocks were strong rallying +5.66% as a group to be the clear standout - when this sector rallies, it will rally hard, however it has experienced a few false starts of late. We’re bullish tech in the short term and can see a short, sharp aggressive bounce unfolding from here.

  • The ASX 200 finished up +47pts/ +0.67% at 7096
  • The IT sector was best on ground (+5.66%) while Communications (+1.49%) & Consumer Discretionary (+1.44%) were also strong.
  • Utilities (-2.15%) and Materials (-0.32%) the weakest links.
  • The RBA kept rates unchanged this afternoon as expected sighting the war in Ukraine as a major source of uncertainty – the AUD at 72.64c
  • Chinese manufacturing data stronger than expected with the Caixin PMI printing 50.1 v 49.1.
  • Energy remains in focus and while the traditional Energy names (WPL, STO, BPT) are showing signs of exhaustion short term, the peripheral energy stocks are moving.
  • Whitehaven Coal (WHC) +5.3% is one of our large portfolio bets looking to test it’s recent ~$3.60 high as Coal prices break out on the upside.
  • Paladin (PDN) +12.99% which is featured in our Emerging Companies Portfolio is following global uranium companies higher, the Global Uranium ETF listed in the US under code URA US is also worth a look( (we own in our ETF portfolio).
  • CBA launched a new Hybrid Security today, hot on the heals of ANZ. The new note will likely be priced at 2.75% over BBSW – we’ll cover tomorrow morning.
  • Some takeover speculation doing the rounds on Pointsbet (PBH) +17.75%
  • Zip Co (Z1P) -6.33% back online following their acquisition of Sezzle (SZL) and cap raise. Not a bad effort really to close at $2.07considering the deal was priced at $1.90.
  • Dubber (DUB) -4.76% fell after releasing results after market yesterday, although they did rally from the intra-day lows, down more than 10%
  • Some of the broader payments type stocks found some love today, Tyro (TYR) & EML Payments (EML) +10% a pop – still a long way to go here.
  • Sandfire (SFR) -11.64% whacked after yesterday disappointing 1H22 results, brokers universally downgrading the stock. We prefer Oz Minerals (OZL).
  • Nice to see Xero (XRO) +7.06% up today after we added to our position last week, we did cut a small holding in Appen (APX) into weakness to buy it so I was sweating on XRO to put a ‘sort of’ positive spin on that decision!
  • While short term performance is irrelevant, interesting today to see Emerging Companies Portfolio up ~4%, while the Income Portfolio was up only ~0.20% after having a very strong February. These are the two extremes across our suit of portfolios and a good measure of risk appetite – we’ll cover the performance of all MM Portfolio in tomorrow’s weekly video update.
  • We also do a specific portfolio report every Wednesday morning, covering performance for the week.
  • Iron Ore was up in Asia today ~4%
  • Gold was down at $US1906 at our close.
  • Asian stocks were okay Hong Kong down -0.39%%, Japan +1.17% while China was up +0.21%
  • US Futures are mostly flat.

PointsBet (PBH) $4.17

PBH +17.46%: There is some speculation circling around the future of US focussed PointsBet prompting a decent rally in the share price today. While we have been long and wrong this stock in our Emerging Companies Portfolio we summed up our view recently which is worth rehashing today… Since peaking a year ago above $17, PBH raised $215m in an institutional placement at $10.00 followed by an entitlement offer at $8.00 to existing shareholders that raised a further ~$185m – shares have been under pressure ever since. It is clear that PBH see a big opportunity and they are going hard at it, however it’s also clear that the cost to acquire customers is increasing given stiff competition which has seen the level of cash burn increase in the last quarter. They have $569m in cash at the end of the quarter, a good war chest in the battle for punters bets which accounts for a large portion of their ~$1.3b market capitalisation. They also own their own technology platform which is extremely valuable when looking to scale in this sector, plus they have acquired valuable licenses to operate.

We simply believe that PBH is too cheap for the strategic value in the business making it a strong takeover candidate in a space that’s seen plenty of consolidation.

Dubber (DUB) $1.40

DUB -4.76%: cloud call recording and AI business Dubber reported aftermarket yesterday to wrap up the reporting period. The result was largely pre-released at the quarterly update in January with Revenue and ARR growth known. Costs have risen as they buildout their global headcount and integrate the technology on a number of large telco platforms. Also weighing on Cash Flow was a large debtor which is yet to settle, likely part of the reason for today’s weakness given no further update on when they expect this to settle. Shares did enjoy a bounce of the lows, there is certainly value in the name here.

Broker Moves

  • Senex Cut to Underperform at RBC; PT A$4.60
  • Allkem Rated New Add at Morgans Financial Limited; PT A$14.83
  • Westpac Cut to Hold at Bell Potter; PT A$24
  • Perenti Raised to Buy at Argonaut Securities; PT A$1.15
  • Waypoint REIT Cut to Accumulate at Ord Minnett; PT A$4
  • InvoCare Raised to Neutral at Citi; PT A$13.25
  • DTC AU Rated New Underperform at Barclay Pearce Capital
  • East 33 Cut to Hold at Shaw and Partners; PT 16 Australian cents
  • Sandfire Cut to Hold at Jefferies; PT A$7.50
  • Zip Co. Cut to Underperform at Jefferies
  • HDN AU Rated New Positive at Evans & Partners Pty Ltd; PT A$1.75
  • B4P AU Raised to Speculative Buy at Evans & Partners Pty Ltd
  • Atlas Arteria Cut to Neutral at Evans & Partners Pty Ltd
  • InvoCare Cut to Hold at Morgans Financial Limited; PT A$13.60
  • Sandfire Cut to Hold at Canaccord; PT A$7.25

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James Gerrish
Portfolio Manager
Market Matters

James is the Lead Portfolio Manager & primary author at Market Matters, a digital advice & investment platform with over 2500 members that offers real market intel & portfolios open for investment. He is also a Senior Portfolio Manager at Shaw and...

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