Cantor Fitzgerald analyst Tom Liston this morning initiated coverage of Amaya Gaming (TSX:AYA) with a BUY rating and $7.50 target price.
Liston says Amaya’s four most recent acquisitions, Chartwell, CryptoLogic, Ongame and Cadillac Jack, are highly strategic and place the company in a solid position to benefit from gambling regulation opening up in the United States.
Liston says that the potential windfall from taxing and regulating online gaming is becoming too tempting for various governments to ignore. But some of these jurisdictions will move to prevent those online gaming providers who operated during the prohibition period from entering the market. The Cantor Fitzgerald analyst says Amaya will benefit from this because it has played by the rules, and been a “good actor”.
Many of the larger business-to-consumer sites that provided online poker over the past decade, notes Liston, will likely be barred from securing U.S. licenses.
Liston says Amaya’s share of a legislated online poker environment could be significant; about $190-million based on a 10% market share and 50% revenue split with operator partners, he says.
Of course, online gaming is just one part of Amaya’s business, accounting for 37% of its 2011 revenue, while land-based gaming made up 9%, and lottery and government solutions was 54%. While he expects that the Cadillac Jack acquisition will provide accelerating growth in licenses, he anticipates that online gaming will be the company’s largest margin driver.
Shares of Amaya Gaming closed today up .9% to $5.65.