NYX GAMING GROUP LTD 11 PCT DEBS V.NYX.DB

Canaccord writes up again......

[petrofac]

NYX Gaming Group (NYX-TSXV: C$1.46 | Buy, C$3.00 PT) Investment recommendation NYX Gaming is a leading supplier of B2B software to online gaming operators with a customer base of large, globally recognized brands such as William Hill and SkyBet. The integration of OpenBet was bumpier and has taken longer than the Street expected with margin pressure evident in 2016. However, under the watchful eye of Canadian Equity Research Industry Update 14 August 2017 15 16 CFO Eric Matejevich, the company has turned the tide of margin erosion and recently announced a refinancing of its debt as it sought to lower interest expense and clean up a complicated capital structure. The company is expected to report its Q2/17E results on August 22 and our sense from Mr. Matejevich's tone is that the company is optimistic that it is on a good trajectory to start under promising and over delivering. In our view, another quarter that shows margin expansion should grab the attention of investors and if the company prints a solid Q3/17E with further margin expansion the stock may be poised to rerate nearer its global B2B peers. Investment highlights Margin expansion underway. Mr. Matejevich stressed that the company is making progress on margin expansion and reiterated that a mid-30s target remains in the cross hairs. Recall that the company came up short of margin expectations in Q3/16 which surprised the Street and has hampered the stock since. New management, debt refinancing and continued strength in the core business should help the company show investors that a trend is underway with Q2/17E and Q3/17E results. "SkinnyBet" or "OpenBet Lite" represent new opportunities. Upon the acquisition of OpenBet, we suggested that taking the product down market to mid-sized operators represented a meaningful cross-sell opportunity. Management reiterated the scale that its OpenBet platform can manage and we believe this will help the company if it deploys a product available to mid-tier customers in 2018. NYX Gaming may be an M&A target. NYX Gaming trades at 6.1x 2017E EV/EBITDA, which may make it a target in an industry trading at a peer average of 11.7x 2017E EV/EBITDA. There was reportedly significant interest in OpenBet from strategic and financial buyers. Given the low valuation, we would not be surprised if B2B operators were not having conversations internally about a potential offer though we note it has been trading at a depressed valuation for some time. Valuation We are BUY rated with a C$3.00 target based on a multiple of 10.5x 2017E EV/EBITDA, a discount to peers at 11.7x. The stock trades at 6.1x 2017E EV/EBITDA and is up +31% in the past three months; despite recent price appreciation, we view the still steep discount to peers as unwarranted given the growth profile of its content business, its long-tenured (and sticky) OpenBet customers, and significant ownership profile of management, in particular CEO Matt Davey.

[uograd]

Thx petrofrac for posting. What is ironic is usually when canaccord or mcquarrie put out a bullish report the next day they are the biggest net sellers. We will see if this trend continues today but really everyone is on eggshells until tuesday morning.

[bohikam]

canaccord analyst posted that updated report to managers and top accounts on last week.