Intertain Group has big upside, says Cantor Fitzgerald Canada

Intertain Group (Intertain Group Stock Quote, Chart, News: TSX:IT) has been a stellar performer since going public but there’s still lot of upside left, says Cantor Fitzgerald Canada analyst Ralph Garcea.

In a research report to clients this morning, Garcea initiated coverage of Intertain Group with a “Buy” rating and a one year target of $28.00, implying a return of 83% at the time of publication.

Garcea says he likes the profitability of Intertain’s bingo business, estimating that it will generate EBITDA of $196-million on pro-forma revenue of $430-million in fiscal 2017. The analyst thinks catalysts include the company’s expansion into the Latin American market, a continued easing of regulations in the United States, growth from poker and from mobile, and from a potential move into the sportsbook segment.

The online gaming segment, led by Amaya Gaming, has exploded in Canada and Garcea has some advice for investors wondering how to play the sector.

“We believe investors should own AYA, Intertain and NYX,” he said. “All three have great management teams that have experience in doing M&A transactions. Amaya will be looking to divest of some assets to help pay down debt, and may look at a Sportsbook transaction to gain scale quickly in the largest segment of the online gambling market. Intertain has done three acquisitions already (Mandalay Media, Vera&John, and Gamesys) and could exit Q4/15 with a $90M+ revenue run-rate. NYX Gaming went public in late December 2014 with a successful IPO, has already acquired the Ongame Network assets from Amaya, and has its sights set on acquiring Amaya’s Chartwell/Cryptologic assets.”

Yesterday, Intertain Group reported its fourth quarter and fiscal 2014 results. The company lost $26.06-million on revenue on $40.77-million.

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