12-month price target:
$5.40
10x 2018E EBITDA
7% 2018E FCF
We assume a 2018E EV multiple of 10x and a FCF yield of 7%. The
integration and success of CryptoLogic/Chartwell and OpenBet as well
as debt paydown are the main catalysts for this stock to reach our target
price. Our target assumes NYX trades closer to industry leader Playtech
at 6% FCF.
Upside potential:
$10.00
15x 2018E EBITDA
4% 2018E FCF
Our upside scenario assumes a 4.0% normalized FCF yield and 15x EV,
similar to historical M&A valuations. NYX is now a top 3 global B2B
provider with multiple product lines and as such is now a more attractive
strategic target.
Downside risk:
$1.00
5x 2017E EBITDA
35% 2017E FCF
Our downside scenario assumes an EV multiple of 5x and 35% FCF as
integration synergies take longer to realize and that NYX’s growth profile
falls below industry average of high single-digit or low double-digit
growth.
Source: FactSet, Macquarie Research, November 2016