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Pollard Banknote Ltd T.PBL

Alternate Symbol(s):  PBKOF

Pollard Banknote Limited is a Canada-based provider of products and solutions to lottery and charitable gaming industries. It provides instant ticket products, licensed games, in-lane ticket options, and sales-driving merchandising solutions from its Schafer Retail Solutions + portfolio. It also offers a full suite of digital offerings, ranging from game apps to comprehensive player engagement and iLottery solutions, including marketing and management services. Its instant tickets and lottery products and services include SureTrack lottery management system, iLottery platform, eInstant game content, interactive digital gaming, including mkodo’s game apps and GeoLocs, PlayOn loyalty programs, retail management services, ScanACTIV, EasyVEND, and lottery ticket dispensers and play stations. It also provides pull-tab tickets, bingo paper, ticket vending machines, and its Diamond Game and Compliant Gaming electronic games and devices to charitable and other gaming markets in North America.


TSX:PBL - Post by User

Post by FormerHedgieon May 09, 2024 10:55am
131 Views
Post# 36031124

REVISITING MAR 6 POST | REITERATE $58 POTENTIAL PRICE

REVISITING MAR 6 POST | REITERATE $58 POTENTIAL PRICE
Reiterate FTM Potential Price of $58 with the potential for upside

Following the Q1/24 results I wanted to revisit the Mar 6th post regarding the potential future value of Pollard.  This quarter provides strong support the PBL achieving the metrics set forth in that post.

My previous post called for a future share price of $58 using the core assumption: 

Base business EBITDA of $46M 
ILottery operating income / EBITDA of $54M
Debt levels of $120M (As at Q1 $77M)

If we take the 24/Q1 Results and annualize them we can gauge the validity of my assumptions. (despite Q1 traditionally being the weakest quarter)

Base Business EBITDA Q1(annualized) 
 [23.7-14.9] 8.8M x 4 = 35.2M (77% of est)
iLottery operating income Q1(annualized) 14.6M x 4 = 58.4M (108% of 54M est)

Based on the Q1 results, the guidance provided and the fact that financial performance is weighted to Q3 and Q4 the confidence in the $58 FTM is very high.

The reduction of long-term deby by $43M ($120M-$77M=$43M)
$1.59/share increase in value from debt reduction alone ($43M / 27.055 s/o)

 

Here is a reminder of the valuation approach used in March 6th.
 
FROM PREVIOUS POST:
New 12 month valuation could look like

BASE BUSINESS VALUE
EBITDA 46M (46% of expected 2024 EBITDA $100M)
EV/EBITDA Multiple 12x
EV = 46Mx12 = 552M
DEBT = 120M (according to SEDAR annual financial statement filing filed today)
Equity Value = 552M-120M = 432M
Share outstanding 27M
Base business equity value / share = 432/27=$16.00

Now for the more interesting part, the iLottery Valuation

ILOTTERY BUSINESS VALUATION
ILottery Op Inc / EBITDA 54M     (54% of 2024's 100M EBITDA estimate)
EV/EBITDA Multi 21x                  (using the neogames current multiple of 21.6x)
EV = 54x21 = 1,134M
No Debt so EV = Market Cap = 1,134
Shares outstanding 27M
Implied iLottery Value / Share = 1,166/27 = 42.00

So, if we combine the base value / share of $16.00 with standalone iLottery value / share of $42.00 we arrive at a sum of the parts valuation of $58.00/share

I think the sum of the parts approach is relevant and valid given the very different growth / operating income % and potential for further growth.


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