The street is still underestimating Amaya Gaming, says Global Maxfin’s Garcea

Amaya Gaming CEO David Baazov. With important regulatory approvals from both the gaming industry and the TSX in the bag on its acquisition of the company that owns the PokerStars and Full Tilt Poker brands, Amaya Gaming (TSX:AYA) is set to unlock considerable value, says Global Maxfin analyst Ralph Garcea.

Amaya yesterday announced that it had received thumbs up from gaming regulatory authorities and conditional approval from the TSX regarding one of the most aggressive acquisitions in recent memory. In June, Amaya announced that 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, a number that was about five times Amaya’s market capitalization at the time.

Garcea thinks the street is still underestimating the impact of Amaya’s recent deals. He notes that the company is trading at 2015E EV/Sales of 3.1x and EV/EBITDA of 7.6x, versus industry comparables at 2.6x and 8.4x, respectively. The analyst thinks the opportunity in an increasingly deregulated U.S. market are huge, and that Amaya could deliver a “mid-20%” return on equity by the end of 2015.

In a research update to clients today, Garcea reiterated his “Strong Buy” rating and increased his one-year target price on Amaya Gaming to $35.00, up from his previous target of $30.00. He thinks the company will generate EBITDA of more than $667-million on revenue of $1.6-billion in fiscal 2015.

At press time, shares of Amaya Gaming were up 17.8% to $30.50.