Short interest in Intertain Group should soon fade, says Mackie

Short interest in Intertain Group (Intertain Group Stock Quote, Chart, News: TSX:IT) should fall as the company’s M&A expertise is revealed, says Mackie Research Capital analyst Nikhil Thadani.

This morning, Intertain announced it had completed the acquisition of the Jackpotjoy, Starspins and Botemania brands from Gamesys for 425.8 million British pounds sterling (approximately $809-million Canadian dollars).

“We are very excited about the completion of the Jackpotjoy acquisition, which is expected to add substantial free cash flow to our business and allow Intertain to further target the female demographic in regulated markets,” said CEO John Kennedy FitzGerald. “In addition to acquiring the world’s leading on-line bingo-led business, we have also entered into a long-term relationship with one of the most well-respected technology and gaming operators, Gamesys.”

Thadani says the market is still skeptical of Intertain, as evidenced by a short position that had reached about two-million shares at the end of March. The analyst says he expects this pessimism will fade.

“Intertain provided excellent clarity pertaining to the acquisition on the Q4/14 results call last month,” says Thadani. “We believe IT stock offers more upside as the company executes in 2015 and the market digests Intertain’s very rapid M&A execution over the past few months.”

In a research update to clients this morning, Thadani reiterated his “Buy” rating and $24.00 one-year target on Intertain Group, implying a return of 36% at the time of publication.

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