The “watershed” acquisition of the company that owns the PokerStars and Full Tilt Poker brands is worth the premium price Amaya Gaming (TSX:AYA) will pay for it, says Cantor Fitzgerald Canada analyst Justin Kew
Late yesterday, Amaya Gaming announced one of the most ambitious acquisitions by a Canadian-listed company in recent memory.
The company said it would acquire Oldford Group Ltd., the parent of Rational Group Ltd., the world’s largest poker business and owner and operator of the PokerStars and Full Tilt Poker for a staggering $4.9-billion.
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Noting that the deal that will increase Amaya’s revenue and EBITDA by more than eight times, Kew says this is a “watershed” acquisition. While he notes that the 11.7x 2013 EV/EBITDA price the company will pay for the asset is a premium to its peer group, he says this is to be expected given its quality.
Kew says his “back of the envelope” estimate for the new entity’s 2015 EBITDA is in the (US)$690-million range. In a research update to clients this morning, the Cantor Fitzgerald analyst maintained his “Buy” recommendation, but raised his one-year target price on Amaya Gaming to (C)$25.50. He arrives at this target by applying an 11x multiple on his 2015 EBITDA number. The new target implied a return of 29% at the time of publication.