With a vital part of the financing for the Poker Stars/Full Tilt Poker acquisition in place, Amaya Gaming (TSX:AYA) is undervalued, says Global Maxfin Capital analyst Ralph Garcea.
On Monday, Amaya announced that it had completed an underwritten bought-deal private-placement of 25-million subscription receipts priced at $20 each, plus a greenshoe option for an additional seven million subscription receipts. The gross proceeds to Amaya from the offering is $640 million.
Garcea says the impact of Monday’s news is positive. He thinks the company’s recent acquisitions have given it scale to deliver a unique platform across the physical, virtual, and online gaming segments. Noting that competitor Aristocrat recently acquired VGT for $1.2-billion, the analyst says the landscape is one of increasing consolidation and that Amaya should be able to command a premium valuation. But at EV/Sales of 3.1x and EV/EBITDA of 7.8x on his 2015 estimates (versus industry comparables at 2.6x and 8.5x), Garcea believes the street is underestimating the newly scaled Amaya.
Midway through June, Amaya Gaming announced one of the most ambitious acquisitions in the recent history of the Canadian markets. 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. The move will increase Amaya’s revenue eightfold.
In a research update to clients yesterday, Garcea maintained his “Strong Buy” rating and $30.00 one-year target on Amaya Gaming, implying a return of 35.8% at the time of publication.