In a research report to clients this morning, Thadani initiated coverage of NYX with a “Buy” rating and one-year target price of $5.00, implying a return of 47% at the time of publication.
Thadani thinks NYX is positioned to benefit from growth in the gaming industry and deserves a premium multiple.
“NYX’s recent annual revenue growth of over 50% y/y has outpaced online gaming market growth of ~10% y/y, aided by M&A,” he notes. “We expect B2B providers, such as NYX, to witness robust growth due to industry, regulatory and technological evolution.”
The analyst also likes the relationship NYX has with Canadian gaming king Amaya. In November of last year, NYX acquired the B2B online poker business of Amaya, called OnGame. The deal resulted in Amaya holding $9-million of NYX unsecured convertible debentures. More importantly, says Thadani, is that NYX entered into a right of first offer agreement with Amaya, which granted NYX the right of first offer to buy additional Amaya B2B assets until December 30th 2015. The analyst believes these assets could generate between $10-million and $25-million in annual EBITDA.
Founded in 1999, Las Vegas-based NYX develops and manufactures digital gaming solutions for interactive, social and mobile gaming. The company IPO’d on the TSX Venture Exchange in December.
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