Ongoing M&A activity in the U.K. online gaming industry will increase Intertain Group’s (TSX:IT) scarcity premium, says Mackie Research Capital analyst Nikhil Thadani.
This past weekend, U.K. betting firm William Hill was approached by competitors 888 and Rank about a merger. The suitors claimed there would be “significant industrial logic in the combination”. The development follows last year’s £700-million bid from William Hill for 888 that was ultimately rebuffed by shareholders.
Thadani says the pace of M&A seems to have accelerated in the U.K., post Brexit, which may have something to do with a lower British Pound. The analyst says this all works in Intertain’s favour.
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“Expectations for IT’s M&A based value unlocking could move up and aid stock price given renewed industry M&A chatter over the weekend,” says Thadani. “Recall, IT has previously indicated the company is running a dual track (being acquired/selling assets or a UK relisting) strategic review, with an additional update expected by the end of July per the company’s previous update on Jun 28th. Management has also previously indicated that potential bidders are still likely interested. We view IT being acquired as perhaps the most compelling path to unlock value vs. a UK relisting.”
In a research update to clients today, Thadani maintained his “Buy” rating and one-year price target of $20.00 on Intertain Group, implying a return of 81 per cent at the time of publication.