Diversified Morning Comments

We are highlighting two of the three names on our watch list that was published overnight. 

Northstar Gaming 
BET-CA | $6.5 MC
Annualized Q3/23 Gross Gaming Revenue $22M; EBITDA -$16M 

Northstar is one of few Canadian domiciled iGaming operators backed by two partners providing credibility to the company’s platform. Beyond Ontario market share expansion, through an acquisition earlier this year, BET is one of a handful of operators with a Canada-wide branded website. 

• Credibility through Partnerships: Backed by two partners – Torstar, providing access to a vast media network, and Playtech (PTEC-LON; NR), a global gaming managed service platform leader, lending unparalleled credibility to Northstar’s venture.
• Platform: Seamless integration of iGaming and media insights on one platform. Torstar’s media assets offer access to approximately 58 million monthly unique viewers, enhancing Northstar’s market exposure.
• Strategic Acquisitions: Acquisition of Slapshot Media enables operations beyond Ontario, unlocking benefits like a larger addressable market and the ability to use inducements for player acquisition.
• Market Share Expansion: Long-term target to capture 3-5% of the total market, with the Ontario market forecasted to grow to $3B-$4B by 2026. ON represents ~40% on the population, estimating Canada-wide market ~$8B.
• Valuation Opportunity: Key comp Rivalry (RVLY-CA; NR) trades at ~1x 2024e sales, the broader group traded between 2x-3x 2024e sales.

Grey Wolf Animal Health 
Annualized Q3/23 Revenue $26M; EBITDA $4M

Grey Wolf Animal Health offers an opportunity to tap into a recession-resistant market, backed by a company with a proven track record of profitability, strategic growth initiatives, and management team with experience to navigate the unique market .

• Growth Initiatives: With a robust portfolio of over 25 specialized animal healthcare products, Grey Wolf strategically targets over 3,800 veterinary clinics and 15,000 veterinarians across Canada. With a fully built sales team, near-term growth will come from product rollouts, clinic penetration and order size.
• Recession-Resistant Market: Pet owners increasingly view their pets as family members, leading to continuous growth in pet health spending. Canadian veterinary health spending is expected to reach US$3.4B by 2027 (2021 US$2.1B).
• Acquisition Potential: WOLF has a history of successful acquisitions and could leverage its ~$8M cash for strategic expansions. This positions the company to capitalize on emerging market trends and further solidify its market presence.
• Attractive Valuation: Trading at 5.8x annualized Q3/23 EBITDA, versus Animal Health peers at ~15x 2024e EBITDA ad Canadian Specialty Pharma at ~7x