The best is yet to come for Intertain Group, says Cantor Fitzgerald

Intertain Group (Intertain Group Stock Quote, Chart, News: TSX:IT) has had an impressive run as a public company, but Cantor Fitzgerald Canada analyst Ralph Garcea thinks there is much more upside to be had.

Tomorrow, before market open, Intertain Group will report its Q1, 2015 results. Garcea thinks the company will post Adjusted EBITDA of $14.1-million on revenue of $30.5-million.

Garcea notes that this quarter will include a full contribution from the Vera and John acquisition, but no revenue from the Jackpotjoy pickup, which closed on April 8. The analyst says the real “step up” comes in the second quarter, when the latter will have eleven weeks of contribution. He also believes a expansion into Latin America could move the company past a half-billion dollar run rate by 2018, if not sooner.

“With the Jackpotjoy and Mandalay Media acquisitions, Intertain has become the largest provider of online, bingo-led gaming – with most of its revenue derived from a female demographic in regulated markets (and the 8th largest online gaming operator in general). Intertain has one of the highest % of revenue from regulated markets (80%) as compared to its peer group (25% to 80%),” says Garcea. “We like the “stickiness” of bingo, and look for EBITDA margins to expand to the 45%-50% range as the company integrates the acquired platforms. Longer term we are looking for revenue growth in the 10%-15% range.

In a research update to clients today, Garcea maintained his “Buy” recommendation and $28.00 one year target price, implying a return of 61% at the time of publication.

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