Ahead of Q3 numbers Amaya Gaming is still undervalued, says Cantor

New Jersey recently became the third state to legalize online betting. Although revenue from the initiative won’t be material until after the second half of 2013, Amaya Gaming’s (TSX:AYA) move into online gaming in New Jersey is a significant value driver, says Cantor Fitzgerald analyst Justin Kew.

On Thursday, Amaya Gaming will report its Q3, 2013 earnings. Kew expects the company will post EBITDA of $14.5-million on revenue of $41.3-million, basically in line with the street’s expectations of $14.8-million EBITDA on a topline of $40.9-million.

Kew says he believes Amaya Gaming has now captured a significant market share in the lucrative New Jersey online gaming market. The company’s partners, Caesars Interactive and Borgata Hotel Casino and Spa, own 55-60% of the land based revenue in the state and the Cantor Fitzgerald Canada analyst says he believes the online gaming market share will ultimately mirror the land based holdings.

New Jersey recently became the third state to legalize online betting.

Kew believes that three multiyear contracts from Amaya Gaming’s Cadillac Jack division announced earlier this year will contribute significantly to the company’s bottom line. These contracts, two with unnamed Mexican customers and one with the California Nations Indian Gaming Association could add about $16-million in annualized EBITDA.

In a research update to clients this morning, Kew maintained his BUY rating and $9.50 on year price target on Amaya Gaming. His target is based on 10x his expectations for the company’s 2014 EV/EBITDA.

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