The Canadian online gaming sector is undervalued, says Cantor Fitzgerald

The reporting season for most of Canada’s online gaming sector is approaching, and Cantor Fitzgerald Canada analyst Ralph Garcea expects some solid results.

On Thursday, Intertain Group (TSX:IT)and Innova Gaming (TSX:IGG) will report their second quarter results, followed by Amaya (TSX:AYA) on Friday. The analyst notes that NYX Gaming (TSXV:NYX) and Tangelo Games Corp. (TSXV:GEL) have yet to confirm dates, but he expects NYX will report the week of August 22 and Tangelo the following week.

Garcea says despite some strong performances over the past few years, Canada’s online gaming sector currently looks cheap when compared to their peers internationally.

“The Canadian gaming names have continued to materially lag their global counterparts, trading at a 35% discount on our one-year price weighted index (to C$100) (albeit up from a 55% discount earlier in the year),” says Garcea.

Garcea says Intertain Group (TSX:IT), which plans to list on the London Stock Exchange, is focused on fundamentals, which he says are “very robust”, something he expects to be confirmed with its second quarter results.

“Intertain now has a world class management and Board in place to redefine the corporate structure and continue delivering sound fundamentals, thus maximizing long-term shareholder value,” says Garcea.

The analyst expects Intertain will post Adjusted EBITDA of $43.83-million on revenue of $116.58-million in the second quarter.

Innova Gaming Group (TSX:IGG), notes Garcea, recently deployed its LT-3 terminals into New Hampshire, its sixth North American market. He says this is good news for shareholders, as LT-3 units are “very profitable”.

Garcea thinks the company, which he expects will post Adjusted EBITDA of $1.4-million on revenue of $5.58-million in the second quarter, is undervalued.

“We note that as at Q1/16, IGG carried a book value of US$1.29/sh and according to our estimates will grow to US$1.32/sh in Q2/16. IGG is currently trading at $1.13/sh.,” says the analyst.