INNOVA GAMING GROUP INC T.IGG

Cda's iGaming Sec: Global MaxFin.Beacon,Global, Globe&Mail

[CuAndAu]

1./ Global Maxfin Aug 18 top 5: TSX: AYA-T, IT-T, NYX-V, IGG-T, CNS-V
2./ Beacon Securities Aug 17 "Can this Minnow Swallow a Whale?
3./ Global Securities Update Aug 17
4./The Globe and Mail Published Monday, Aug. 17, 2015 6:01PM EDT

1./ GMCI’S GAMING COVERAGE Date: August 18, 2015
THE ROYAL FLUSH - GMCI’S GAMING COVERAGE

We believe the below-mentioned companies all have experienced management
teams that are proficient and renowned with a history of completing transformational
strategic M&A transactions. We have picked the above names for their leverage to
different verticals of gaming namely, poker, casino, bingo, elottery and sports
betting

We like this sector for its: 1) high barriers to entry; 2) sticky business;
3) high FCF; 4) leverage to mobile (smart phone proliferation);
and 5) improving regulatory landscape.

1. We like Amaya (AYA-T) for its ability leverage to online poker and its
ability to move into other verticals such as sports and casino and the
potential for improving regulatory landscape in the US. (Trades at EV/EBITDA
of 10.5x and 10.2x of EBITDA for 2015E and 2016E – peers at 9.3x and 8.1x).

2. We like Intertain (IT-T) for its leverage to Bingo and Casino with a leading
market share in Europe and UK in these segments. We believe the recent
changes in tax policy in Europe and the UK would present more M&A
opportunities in the sector, as smaller players would be compelled to sell in
the face of increased costs and competition. (Trades at EV/EBITDA of 10.9x
and 7.7x of EBITDA for 2015E and 2016E – peers at 9.3x and 8.1x).

3. We like NYX (NYX-V) for its leverage to mobile gaming as it is one of the
leading providers of B2B software to large industry players such as Amaya, 888,
and Intertain to name a few. Additionally, it recent purchase of Amaya’s
Cryptologic assets has dramatically improved its FCF profile to over
$25M (2016E) from just under $2M (2015E). (Trades at EV/EBITDA of 52.8x
and 4.8x of EBITDA for 2015E and 2016E – peers at 19.7x and 6.6x).

4. We like Innova (TSX:IGG) for its leverage to the opening eInstant gaming
market and their ability to negotiate deals with different state and provincial
regulators. (Trades at EV/EBITDA of 6.3x and 3.9x of EBITDA for 2015E and
2016E – peers at 7.8x and 6.7x).

5. We like Contagious (TSXV-CNS) for its leverage to sports betting and soccer,
in particular, in the UK. Additionally, CG is in advanced talks for a potential
transaction with Sportstech, of U.K, that could propel the stock skywards.

Manish Grigo, CFA, MBA | [e-mail] | 416.306.2506

www.globalmci.com

2./ August 17, 2015 Contagious Gaming Inc. (CNS-V)
Can This Minnow Swallow a Whale? 12 Month Target: $0.85 (unch)

CLICK HERE TO VIEW FULL REPORT: Bitly Link https://bit.ly/1E7zyvB or//
: https://beaconsecurities.ca/rhq_app/public/download.php?id=499


3./ Global Securities Updated Report Aug 18 Bitly Link :https://bit.ly/1HUokFG or//
/www.globalsec.biz/market_news/research/capitalmarket/CNS_08182015.pdf" target="_blank" rel="noindex nofollow">https://www.globalsec.biz/market_news/research/capitalmarket/CNS_08182015.pdf


4./ ~The Globe and Mail Published Monday, Aug. 17, 2015 6:01PM EDT

Niall McGee
Streetwise

Junior Canadian gambling software company Contagious Gaming Inc. acknowledged it is in discussions to buy its much larger United Kingdom-based competitor Sportech PLC., but says any transaction would be subject to a number of conditions, including securing financing.

On Friday, Sportech said it had received a takeover proposal from the Vancouver-based firm. With a market capitalization of just under $300-million, Sportech is 16 times bigger than Contagious, which is worth only around $18.5-million.

While Contagious generated only $1.2-mlllion in revenue last year, Sportech took in $213-million. Sportech makes most of its profits from running the Football Pools, with about 300,000 people a week betting on the outcome of soccer games. The format has been around in Britain since the 1920s.

Deals of this kind aren’t entirely unheard of in the gambling sector. Just over a year ago, Montreal-based Amaya Inc. swallowed Rational Group Ltd., the owner of PokerStars, for $4.9-billion (U.S.). At the time, PokerStars was more than four times larger than its acquirer. Amaya borrowed huge and convinced investors to buy its stock at a massive premium to get the deal done.

The Amaya/Poker Stars deal “ended up being very lucrative for shareholders” wrote Vahan Ajamian, an analyst with Beacon Securities Ltd. in a note to clients, and he believes Contagious can pull off its own version of a minnow swallowing a whale.

Amaya/PokerStars “provides a recent precedent for investors that this kind of thing is doable, and it can get done, and a year later you could be up huge on your money,” said Mr. Ajamian in an interview. Contagious’s hands seem to be somewhat tied in terms of how it can finance the deal, though. In a release, Sportech said any takeover offer would be composed of “a majority in cash,” and the rest in shares. Contagious has only a few million in cash onits balance sheet, so that means the company is potentially looking at a gigantic loan.

That’s not necessarily a bad thing for shareholders. The less equity Contagious has to issue, the higher the potential gain is for its shareholders, according to Mr. Ajamian. “Should Contagious use debt to fund a portion of the transaction, we could foresee a scenario where the resulting shares have a total value of $0.86/share,” he wrote. With Contagious’s stock currently trading around $0.25 (Canadian) on the TSX Venture Exchange, shareholders are potentially looking at a big bump.

Should Contagious hammer out a deal with Sportech, rival bidders could emerge. However, because Contagious and Sportech seem to be on friendly terms, any potential deal is likely to be recommended to both sets of shareholders, said Mr. Ajamian, and would put Contagious in an advantageous situation vis--vis other suitors.

The Canadian online gambling sector has seen a number of high-profile mergers and acquisitions this year, including the Intertain Group Ltd. buying $812-million in assets from British company Gamesys Ltd., and NYX Gaming Ltd. acquiring Chartwell Technology and CryptoLogic from Amaya for $150-million.

Sportech and Contagious declined a request for comment.