Intertain Group (TSX:IT) deserves a premium multiple, says Mackie Research Capital analyst Nikhil Thadani.
Yesterday, Intertain Group released its Q3, 2014 results. The company posted EBITDA of $6.95-million on revenue of $13.7-million ((or $12.7-million adjusted for affiliate marketing expense reclassification).
“Our third quarter performance is in line with our committed strategy of organic and acquisitive growth,” said CEO John Fitzgerald. “Our Mandalay Media business continues to see performance that exceeds expectations across key performance indicators, and InterCasino gross gaming revenues are improving as a result of strategic and focused marketing. “We are also making substantial progress with respect to our Vera & John acquisition and anticipate closing by the end of 2014. We continued to see numerous, strategic and accretive acquisition opportunities that we hope to capitalize on in the coming months.”
Thadani says that, heading into a seasonally strong fourth quarter, Intertain Group has many drivers for growth. He says the company could expand into new jurisdictions, that organic revenue growth could benefit from planned upcoming television marketing, and that it could benefit from “revenue synergies between bingo, Vera&John and the UK.”
In a research update to clients today, Thadani maintained his “Buy” rating on Intertain Group, but raised his one-year target on the stock from $15.75 to $17.00. The analyst notes that most online gaming providers trade in the 8-13X forward EV/EBITDA range, and that his target comes in at 12x.
“Intertain’s revenue guarantee, strong organic prospects, able management team, very rapid M&A execution and very likely additional M&A upside warrants a premium multiple, in our view,” he explained.