M Partners analyst Nicholas Cortellucci thinks Capital of playmakers (Playmaker Capital Quote, Chart, News, Analysts, Financials TSXV: PMKR) could turn into a solid investment opportunity, launching the hedge on Monday with a “Buy” rating and a target price of $ 1.25 / share for an expected return of 74% at time of publication.
Founded in 2019 in partnership with Relay Ventures and based in Toronto, Playmaker Capital is a digital sports media company that currently brings together brands and operators with the goal of creating an ecosystem of assets in the space.
The main pillars of the Playmaker business model include building a large and diverse audience of sports fans, building engagement across multiple distribution channels, using technology to monetize and deliver UI / UX of foreground and the development of tools to acquire, retain and convert users.
Corellucci said ideal acquisition targets for Playmaker include companies that can bring significant strategic benefits to the Playmaker ecosystem, are financially accretive, have an equity and / or earn-out component, have teams of proven and aligned leadership, and are profitable, or have a clear path to profitability.
“Playmaker’s digital media asset portfolio has very engaged fan bases that are sought after by global brands and sports betting operators,” said Cortellucci. “Major online sports betting operators (OSBs) like DraftKings have huge marketing budgets that are allocated to acquiring users that closely resemble those of PMKR’s platforms.”
The company took an important step in April, acquiring a core asset in Futbol Sites, which reported revenue of $ 6.2 million and adjusted EBITDA of $ 2.2 million in 2020, for $ 35 million, followed by completion of an RTO of Apolo III Acquisition Corp., which included a $ 24 million increase in subscription receipts.
“PMKR tends not to participate in formal M&A processes, which allows it to acquire strategic assets for low multiples,” Cortellucci said. “Playmaker introduces target companies to the Playmaker vision and ecosystem, which sets them apart from other potential buyers.”
From there, Playmaker continued execution on the acquisition front, completing six more deals in the second half of 2021 for a total amount of approximately $ 50 million, including cash, stocks and add-ons. price.
New additions to the company’s portfolio during this time include Brazil-based Fanáticos Por Futebol, North America-focused YB Media (operating professionally as YardBarker), the online gaming technology solutions provider Two-Up Agency, Varsky Sports and the associated partnership with the Argentine sports journalist. Juan Pablo Varsky, Edmonton-based digital media group The Nation Network and Brazilian poker platform Grupo SuperPoker.
“We are seeing strong momentum across the three levers of our growth engine – organic, acquisition and synergies – and we will continue our efforts to maximize each,” said Jordan Gnat, Founder and CEO of Playmaker in the company’s press release. November 15. . “We continue to develop our pipeline, as evidenced by the recently announced acquisitions of VarksySports, SuperPoker and The Nation Network. The integration of these companies is well underway and we are delighted with the level of collaboration between our companies and the shared vision to build a leading sports media company in the market.
Cortellucci predicts a big step forward for Playmaker in the near future, forecasting a near doubling of revenue from the $ 13.6 million forecast for 2021 (all figures are in US dollars) to $ 26.3 million. dollars in 2022, after a small step forward to $ 31.3 million in 2023, a potential increase of 19% year-over-year.
From an EBITDA perspective, Cortellucci forecasts physical growth of $ 5 million in 2021 to $ 9.2 million forecast in 2022, a potential increase of 84% year-over-year. From there, Cortellucci projects an eight-digit jump to $ 10.6 million for 2023; During this period, he predicts that the company’s EBITDA margin will decrease from 37% in 2021 to 35% in 2022 and then to 34% in 2023.
From a valuation perspective, Cortellucci predicts that Playmaker’s EV / Sales multiple will drop from 7.9x in 2021 (4.1x for the peer group) to 4.1x expected in 2022 (3.3x for the peer group). pairs), then drops back to 3.4x in 2023 (2.8x expected for the peer group).
The EV / EBITDA multiple tells a similar story, with Playmaker expected to drop from 21.3x in 2021 (13.7x for the peer group) to 11.6x expected in 2022 (10.1x for the peer group) and then drop again to 10.1x in 2023 to beat the peer group forecast of 10.7x.
Corellucci said Playmaker is currently trading at a discount to its peers.
“Playmaker is currently trading at 3.4x sales in 2023 and 10.1x Adjusted EBITDA in 2023 compared to its peers at 2.8x sales in 2023 and 10.7x Adjusted EBITDA in 2023. We believe that PMKR’s higher margins, organic growth and track record of strategic acquisitions should justify a higher multiple, ”he wrote.
“PMKR brings together digital sports media companies at accretive multiples, creating an ecosystem of assets that are becoming increasingly important to sports betting operators competing for customers,” Cortellucci said. “We believe that as countries like Canada, Brazil and Argentina get into the legal game and the US market continues to open up, this effect will only increase, bodes well for the proposal. value of PMKR. “
Playmaker Capital has proven to be a strong signing for many investors in 2021, producing a 28.3% return since it began trading on the TSX Venture on June 3, although it turned out to be cooled slightly over the past month after hitting a high of $ 0.89 / share on November 15.