While shares of Great Canadian Gaming Corp. are down 45% so far this year, Scotia Capital analyst Turan Quettawala says the stock represents “great value for long-term, patient investors.”
In a note to clients, Mr. Quettawala said:
Although there may be some quarterly volatility based on the weak macro environment and possible disruptions due to ongoing expansion projects,” we believe investors buying Great Canadian Gaming (OTCPK:GCGMF) at current levels are likely to be well rewarded over the next 12-18 months.
The stock has mainly be hit “in sympathy to U.S. Comps and worries about consumer discretionary spending. But Mr. Quettawala is more upbeat, premised on his view that earnings growth is likely to remain strong over the next three years based on revenue growth from new expansion projects and margin improvements as the company’s restructuring efforts “bear fruit.” (A restructuring in Halifax operations will hit earnings by C$2-million in the quarter, but yield savings of C$2.5-million annually going forward.)
Mr. Quettawalla, who has an outperform rating on the stock, expects that when the company reports second-quarter earnings next week, it will report revenues of C$103 million (up 5.7% year-over-year), earnings before interest, taxes, depreciation and amortization of C$29.2 million (compared to consensus of $30.5-million and net earnings per share of C$0.10 (a penny higher than consensus). He has a target price of C$15 on the stock, a 66% return compared to the $9 the stock is now trading at. His two-year target is C$18.00.