Analysts at Blue Ocean Equities have responded positively to today’s news that Intecq negotiated a contract to supply gaming systems at Federal Group’s Wrest Point Casino in Hobart and Country Club Tasmania in Launceston.
Intecq has commercial agreements with more than 800 customers operating more than 75,000 electronic gaming machines predominantly in Australia, but with a small presence in the broader Asia-Pacific region
Intecq’s wholly-owned subsidiary ebet was selected to supply its business intelligence, gaming management and player loyalty systems. The contract which involves support for nearly 1100 gaming machines will generate $2.4 million in revenue in fiscal 2017 followed by annual recurring revenue of $350,000 over the next six years with an option to extend to 10 years.
While the headline figures aren’t large the win represents the biggest ever single contract to the company, and significantly it adds to ebet’s casino footprint which includes Reef Casino in Cairns and two casinos in Noumea.
There is no doubt investors understand the importance of this development with the company’s shares rallying 7.4%, albeit under low volumes. The lack of liquidity is a key factor holding back Intecq.
Setting that aside though, analysts at Blue Ocean highlighted that this development would further support its expectation of net profit before tax growth of more than 400% between fiscal years 2015 and 2018.
The broker has a price target of $5.45 on the stock implying 19% upside to this morning’s opening price of $4.56. Today’s midday high of $4.85 implies a 60 per cent share price gain in the space of two months.
While one could argue that this makes the company a prime candidate for profit-taking, it is trading on a fairly conservative PE multiple of 13 relative to Blue Ocean’s forecasts for fiscal 2017. This compares with the industry group average PE multiple of 17.5.