Investing in small cap stocks at the right time often results in maximising your returns. Two such ASX stocks are
PointsBet Holdings Limited (ASX: PBH)
PointsBet is currently undergoing a substantial transformation as it embraces a more user and family-oriented strategy. A key initiative in this strategy involves the cessation of advertising between 6:30 PM and 9:30 PM, a timeframe typically associated with family viewing, in order to focus on adult audiences who engage with television after 9:30 PM, which constitutes the company’s primary demographic for spending and gaming.
PointsBet Holdings Limited in its FY24 annual results for the period ended 30 June 2024, witnessed a 17% increase in revenue compared to the previous year. The company’s gross profit margin improved to 52.8%, due to better global efficiency and growing contributions from Canada, where the unit economics are more favourable. Marketing expenses decreased in both Australia and Canada, with Australia spending A$45.2 million (down 26%) and Canada A$25.8 million (down 12%).
PointsBet has shown consistent revenue growth since its inception, expanding its footprint in Australia and Canada. The company has tapped into a substantial total addressable market for online sports betting and iGaming, with notable progress in Canada since its launch in April 2022.
In Australia, PointsBet’s net win growth is on an upward trajectory, supported by stable contributions from customer cohorts and improving product loyalty, a trend that is also evident in Canada. For FY25, the company anticipates revenue between A$280 million and A$290 million, up from A$245.5 million in FY24. The company expects to achieve EBITDA of A$11 million to A$16 million, compared to a loss of A$1.8 million previously. This growth will be driven by market share gains, maintaining a solid gross profit margin despite increased costs, and leveraging their fixed cost base for better efficiency. PointsBet aims to be cash flow breakeven by the end of FY25.
Resimac Group Limited (ASX: RMC)
Resimac Group Limited released its FY24 results on 29 August 2024, reporting a normalised NPAT of $43.1 million, reflecting a 42% decline from FY23. The Group's Assets Under Management (AUM) increased by 2% to $14.0 billion, with home loans dipping by 1.9% to $12.9 billion, while asset finance grew significantly by 76%, rising $0.5 billion to $1.1 billion.
The company made notable strides in diversifying its portfolio, with asset finance representing 8.1% of total AUM as of June 2024, up from 4.6% the previous year. However, net interest margin (NIM) decreased by 12 basis points to 1.56%, compared to 1.68% in FY23. Provision coverage for the asset finance business grew substantially, from 42bps to 86bps, aligning with portfolio growth.
The board declared a fully franked final dividend of 3.5 cents per share, bringing the total full-year dividend to 7.0 cents per share, which represents a payout ratio of 65% on a normalised basis.
In the latter half of FY24, Resimac Group Limited saw a recovery in Assets Under Management (AUM) and improved pricing on Residential Mortgage-Backed Securities (RMBS) transactions. While normalised NPAT declined year-on-year due to pressures on net interest margins and lower average AUM balances, the Group achieved 4% AUM growth in the second half. Notably, active broker numbers increased by 28% compared to FY23, reflecting stronger engagement. The asset finance division continues to be a key pillar of the Group’s diversification strategy, delivering impressive growth. Resimac remains committed to its digital transformation roadmap, which includes significant platform upgrades and automation improvements to enhance operational efficiency.
Resimac Group Limited has made notable progress toward its strategic objectives despite challenging economic conditions. The stabilisation of the Home Loans portfolio, coupled with significant growth in the Asset Finance segment, signals the potential for improved performance in FY25.
The company has effectively leveraged opportunities through targeted product offerings, resulting in a sustained rise in broker applications and home loan settlements. Resimac remains focused on becoming Australia’s preferred non-bank lender, with a broker and customer-centric growth strategy at its core. The acquisition of Sonder has further enhanced Resimac's distribution and product capabilities, solidifying its market position. Despite macroeconomic headwinds, the company's emphasis on customer support and service excellence, driven by its dedicated team and technological advancements, continues to fuel growth. With a strong balance sheet, stable funding platform, expanding broker network, and a capable workforce, Resimac is well positioned for future growth, driving long-term shareholder value.
Source: Company’s Report
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