Amaya Gaming rated Strong Buy by Global Maxfin’s Garcea

With a string of recent, high profile acquisitions, it’s been hard to miss Amaya Gaming (TSXV:AYA) over the past year.

The company, which took home Cantech Letter’s 2012 Canadian Tech Stock of the Year in the TSX Venture category, has scaled its business with the pickups of Ongame Networks, Cryptologic, Chartwell Technology and, most impactfully, the $177-million acquisition of Cadillac Jack, which has machine placements in more than 200 venues in the United States and Mexico.

The activity has driven shares of Amaya from $2.80 a year ago today to recent highs approaching the $6 mark.

But Global Maxfin Capital analyst Ralph Garcea says there is still room on the Amaya bandwagon. He says the company’s recent acquisitions, paired with high profile contracts with names like Mohegan Sun, Playboy, and Bally, has delivered enough scale to Amaya Gaming’s business to drive it to more than $200-million in revenue and $80-million in EBITDA by the end of 2014. He says Amaya’s growth could be driven by a number of factors, including the possibility that online gaming in the U.S. market will be legalized and that larger competitors could view Amaya as a potential take-out target. In a report to clients yesterday, Garcea initiated coverage of Amaya Gaming with a STRONG BUY rating and $10 target.

Garcea says that despite the recent uptick in the company’s shares, Amaya still trades at a discount to its peers. The company, he says, trades at 6.5x fiscal 2013 EV/EBITDA based on consensus estimates, and its global gaming comparables are trading at an average of 8.5x on the same basis. He warns, however, that this is not a story without risk. The gaming sector, he notes, is highly regulated and competitive. Still, says Garcea, the pie is big and Amaya is well positioned. The Global Maxfin analyst points to a study by H2 Gambling Capital which revealed that online gambling revenue has grown from about (US) $7.4-billion in 2003 to more than $35-billion in 2012, and is expected to hit $50-billion by 2016.

At press time, shares of Amaya Gaming were down .5% to $5.70.

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