Northland Capital initiates coverage of Amaya Gaming with an $8 target

Analyst Ralph Garcea says that after doing so much consolidating itself, Amaya may now become a target for a larger consolidator, especially considering the possibility that online gaming may soon be legalized.

Earlier this month, Amaya Gaming (TSXV:AYA)completed the acquisition of Atlanta-based gaming machine maker Cadillac Jack. The addition, which comes on the heels of several recent acquisitions that have turned Amaya into an upstart consolidator in the gaming industry, cost the company $177-million.

Northland Capital Partners analyst Ralph Garcea says Amaya’s aggressive expansion has established a diversified revenue stream from software licensing, finance leases and sales. Whats more, he says, is that Amaya is becoming a global player, with strength in North America, Europe and the Caribbean. Garcea believes that Amaya’s recent acquisitions will drive it to $57-million in EBITDA on revenue of $155-million by the end of 2013. In a research report to clients Friday Garcea initiated coverage of Amaya Gaming with a Sector Outperform rating and $8 target.

Amaya Gaming, which was founded in 2004 and IPO’d on the TSX Venture Exchange in July of 2010, has in the past designed electronic table games that allow players to remotely play majong, bingo or horse racing. But the company vaulted to public attention early in 2011 when it secured a license from the Betting Control and Licensing Board of Kenya to operate online gaming. Amaya diversified its reach last year when The company acquired struggling Calgary-based Chartwell Technologies in July for just under $23 million, and followed that with the December pickup of Cryptologic, a company founded in 1995 by brothers Andrew and Mark Rivkin that became one of the world’s largest online gaming platform providers, but was also struggling. Earlier this year, Amaya paid €15m for the Ongame poker network.

Garcea says that after doing so much consolidating itself, Amaya may now become a target for a larger consolidator, especially considering the possibility that online gaming may soon be legalized. This past February, two senators California senators introduced draft legislation to regulate online gaming there. The proposed bill, called the The Internet Gambling Consumer Protection and Public-Private Partnership Act of 2012 proposes to tax internet poker at a rate of 10% of gross revenue.

At press time, shares of Amaya Gaming were even at $3.90.

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