Buy Playmaker Capital for a double, Echelon says

Echelon Capital Markets analyst Rob Goff is still keeping an eye on Playmaker Capital (Playmaker Capital Quote, Chart, News, Analysts, Financials TSXV:PMKR) giving the company a “Speculative Buy” rating and target price of $1.20/share for a projected return of 106.9 per cent in an update to clients on Thursday.

Originally a partnership with Relay Ventures, Toronto-based Playmaker Capital is a sports media company focused on building highly engaged communities of sports fans in order to deliver outsized value to sports betting companies, leagues, teams, and advertisers.

Goff’s analysis comes after Playmaker released its fourth quarter financial results, with Goff noting a number of beats across the board.

“The results serve to highlight the abundance of organic growth levers at Playmaker’s disposal, along with the revenue synergy capabilities the Company possesses within its M&A integration playbook,” Goff said.

For the quarter, Playmaker Capital reported revenue of $7 million (all report figures are in US dollars), providing a beat in relation to the Echelon projection of $6.1 million and the consensus forecast of $5.8 million to produce 47 per cent sequential growth. On a pro-forma basis, the numbers jump to $7.5 million in revenue for a year-over-year increase of 49 per cent.

Playmaker’s EBITDA also performed well, providing a beat at $2.5 million compared to the Echelon forecast of $2.2 million and the consensus projection of $2.3 million while producing 28 per cent sequential growth. When working on a pro-forma basis, the EBITDA figure jumps to $2.9 million, though the sequential growth drops to 23 per cent.

“We are acquiring great companies and successfully integrating them to leverage the centres of excellence within each business for the benefit of the entire Playmaker ecosystem,” said Jordan Gnat, Founder and CEO of Playmaker in the company’s March 21 press release. “Our audience numbers have grown dramatically.”

“We have expanded our distribution channels to deliver relevant content to our fans when they want it, how they want it, and where they want it,” Gnat added.

In particular, Goff’s excitement can be traced to Playmaker’s Bench tech stack, which the company noted to be producing a 50 per cent year-over-year increase in revenue per impression for Yardbarker, and is working to get The Nation Network onto the platform as well, with an aim of being fully migrated by the second quarter of 2022.

Goff also noted the importance of Playmaker’s platforms working in concert with one another, with just one example being Yardbarker’s syndication team serving to unlock new revenue streams for partners like The Nation Network and Futbol Sites. Meanwhile, he also points to online sports betting as a particular tailwind of interest for the company.

The company’s financial results for both the fourth quarter and the full 2021 fiscal year have prompted Goff to make a few revisions to his forecasts. After ending 2021 with $14.8 million in revenue, Goff has raised his 2022 projection from $27.8 million to $28.8 million, forecasting a near double with a projected year-over-year increase of 94.6 per cent. Looking ahead to 2023, Goff forecasts revenue of $34.5 million, producing a more modest potential year-over-year increase of 19.8 per cent.

From a valuation perspective, Goff projects the company’s EV/Revenue multiple to drop from the reported 6.1x in 2021 to a projected 3.2x in 2022, then to 2.6x in 2023, which comes in ahead of the target of 5.7x, but is still slightly behind the projected peer group average of 1.8x.

After Playmaker ended 2021 with $5.4 million in adjusted EBITDA, Goff lifted his 2022 forecast from $9.7 million to $10.1 million for an implied margin of 35.1 per cent. Meanwhile, his 2023 forecast remains at $12 million, implying a margin of 34.8 per cent.

In terms of valuation, Goff forecasts the company’s EV/adjusted EBITDA multiple to drop from the reported 16.8x in 2021 to a projected 9x in 2022, then to a projected 7.6x in 2023, which would come in ahead of the projected target of 16.4x and the projected peer group average of 31.4x.

Overall, Goff is a firm believer in the tailwinds, both organic and inorganic, that Playmaker Capital could be working with moving forward.

“We are encouraged by another strong quarter from the Company, continuing to positively reset expectations on the back of its potent organic growth engine and ecosystem that feeds on its acquired assets,” Goff said. “Playmaker’s playbook is being revealed as one that seeks to acquire a foundation of engaging, authentic properties and platforms, before pulling multiple organic growth levers to supercharge monetization.”

Since it began trading on the TSX Venture Exchange in June, Playmaker’s share price has gone up by 9.4 per cent, though it has decreased by 19.4 per cent since the start of 2022. Playmaker steadily started climbing after hitting a low point of $0.36/share on July 19, eventually reaching a high of $0.89/share on November 15.