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Intertain Group has more upside, says Mackie Research Capital

Intertain Group
Intertain Group
“We believe Intertain deserves a premium multiple,” says Mackie Research Capital analyst Nikhil Thadani. “Intertain’s revenue guarantee, strong organic prospects, able management team, very rapid M&A execution and more M&A upside warrants a premium multiple.”

Intertain Group’s (Intertain Group Stock Quote, Chart, News: TSX:IT) acquisition of Vera&John may soon be followed by M&A activity from the company, says Mackie Research Capital analyst Nikhil Thadani.

Yesterday, Intertain announced it had entered into a non-binding letter of intent to acquire Dumarca Holdings Ltd., the parent company of online casino player Vera&John group.

Intertain says it will pay up to $126.1-million for the company, and will make an initial payment of €44.5 million in cash and €36.5 million in common shares. The final payment price will be determined by certain milestones. Vera&John generated €4.6 million of EBITDA on revenue of €25.9 million in 2013, up 124% from the €11.6 million topline it reported the previous year.

Thadani thinks this acquisition price appears fair and could immediately put Intertain on an EBITDA run-rate of more than $50-million per year, if we are to assume the company paid more than 6x 2015 EBITDA for Vera&John. He thinks the relatively new online casino could see increasing upside from mobile, which is expected to provide more than 35% of its 2014 revenue.

The Vera&John acquisition is the second significant such transaction for the recently listed Intertain. In June, the company reached an agreement to acquire Mandalay Media for approximately $82.4 million. Mandalay owned some of the U.K’s most popular bingo websites, including Costa Bingo, Sing Bingo, City Bingo and Fancy Bingo.Thadani thinks the is not the last time we will be talking about M&A activity for the company and says he expects it will remain acquisitive.

As for valuation, the analyst thinks we have yet to see the top on Intertain Group.

“We believe Intertain deserves a premium multiple,” says Thadani. “Intertain’s revenue guarantee, strong organic prospects, able management team, very rapid M&A execution and more M&A upside warrants a premium multiple.”

In a research update to clients yesterday, Thadani maintained his “Buy” rating, but raised his one-year target on the stock from $14.00 to $15.75. The analyst says he will revise his estimates once the Vera&John acquisition closes.

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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