Intertain Group is no gamble, says Cantor Fitzgerald Canada

A better than expected quarter has Cantor Fitzgerald Canada analyst Ralph Garcea feeling bullish about Intertain Group (Intertain Group Stock Quote, Chart, News: TSX:IT).

Yesterday, Intertain Group reported its fourth quarter and fiscal 2015 results. In the fourth quarter, the company posted adjusted EBITDA of $53.3-million on revenue of $137-million.

“As a company, we have delivered quarter after quarter,” said CEO John Kennedy FitzGerald. “Business results continue to show growing value from the assets that have been acquired. Fourth quarter again demonstrates the quality and performance of Intertain’s business segments, and proves that the fundamentals of our business are strong and our prospects are very encouraging. The results show that our business is sound, that our customer base is stable and growing, and that our market position is unchanged — we are the largest on-line bingo-led operator in the world.”

Garcea notes that Intertain Group’s fourth quarter results bested both his and the street’s expectation on both the top and bottom line. The analyst says the improvement are being driven by the company’s efforts to engage mobile users.

“Mobile now is ~40% of total revenues (vs 0% in 2014); and 55% of new customer acquisition, notes Garcea. “Mobile provides ~2x the average revenue of a desktop customer.”

While the analyst says the company has some unfinished business in the form of finding a new CEO and sorting through potential new acquisitions or sales, he nonetheless sees big things on the horizon for Intertain Group.

With two full quarters of fully integrated operations now behind us, we see IT driving to $500M+ in revs and $200M+ in EBITDA over the next two years,” says the analyst. “We believe the Q4/15 results provide more confidence in the model and strategy.”

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 189 per cent at the time of publication.

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