Intertain Group says all options are on the table

Intertain Group’s (Intertain Group Stock Quote, Chart, News: TSX:IT) investor day, held at the head offices of Gamesys offices in London, U.K. has Cantor Fitzgerald Canada analyst Ralph Garcea feeling positive about the company’s future.

On December 17 of last year, hedge fund manager Ben Axler of Spruce Point Capital Management wrote an article in Seeking Alpha that claimed Intertain Group had 45 to 70 per cent downside. Axler called Intertain “…another questionable, highly levered Canadian roll-up focused on online gaming, but fraught with numerous accounting, financial disclosure, and management/governance issues” and claimed the company had “questionable” connections to stock promoters. Axler also said that the company’s use of three auditors was “a red flag”.

In the wake of the article, shares of Intertain fell sharply and the company issued a press release that called the report “misleading and self-serving” and today another saying it had initiated a review led by non-management directors and independent advisers who would evaluate the information.

The company said its initial take was that there were “numerous factual inaccuracies and mischaracterizations of data”.

Garcea says we should see a rebuttal to the short report on Monday, February 8th. The analyst says he continues to see a lot of value in the company and believes catalysts are on the horizon.

“The tone of the meeting was positive with management and the Chair reaffirming the strong fundamentals,” said Garcea. “Process changes will be made and John Fitzgerald reassured the room that they are “looking at all options” to maximize shareholder value – a divesture, M&A, privatization, and/or relisting in the UK/Sweden, are all on the table.”

In a research update to clients today, Garcea maintained his “Buy” rating and one-year target price of $28.00 on Intertain Group, implying a return of 211 per cent at the time of publication.