Canaccord reiterates 'buy' rating on JPJ following strong first half
Analysts at Canaccord Genuity reiterated their 'buy' rating on bingo and casino games operator JPJ Group on Tuesday as the group turned in first-half results that came in ahead of their expectations.
JPJ saw revenues increase 14% and underlying earnings grow 2% in the first half of its trading year, primarily reflecting "continued outperformance" in its Vera&John unit where revenues were up 55% to £37.6m.
With JPJ's board remaining confident in its full-year outlook for EBITDA of £96.5m, Canaccord increased its forecast for underlying EBITDA by £3.5m to £100.0m and its pro-forma 2019 EBITDA estimate to £154.9m.
"Our FY20-21 forecasts are unchanged but there is clearly a strong foundation on which to build given the top-line momentum in both JPJ and Gamesys," said Canaccord.
"The stock trades on 6.0x FY20 EV/EBITDA with a 17.0% FCF yield, too cheap for quality earnings growth, in our view, and at a discount to the peer group average of 6.8x."
The Canadian broker acknowledged that the operational environment in the UK remained "challenging", as evidenced by ongoing media coverage, but said that with JPJ's stock trading at its current multiples, it was "too cheap for quality earnings growth".
In addition to maintaining its 'buy' rating on the stock, Canaccord also reiterated its 1,310p target price for JPJ.