Q1/17: Watch for more margin progress Estimates Revised ...

[Pages:30]NYX Gaming Group

Gaming Technology

Canadian Equity Research 30 May 2017

Kevin Wright | Analyst | Canaccord Genuity Corp. (Canada) | kfwright@ | 1.416.869.7294 Taylor Arnold | Associate | Canaccord Genuity Corp. (Canada) | tarnold@ | 1.416.687.6359

BUY unchanged

PRICE TARGET unchanged Price (30-May) Ticker

C$3.00

C$1.07 NYX-TSXV

52-Week Range (C$):

0.97 - 2.98

Avg Daily Vol (000s) :

239.0

Market Cap (C$M):

116

Shares Out. (M) :

108.2

Total Return to Target (%) :

180.4

Net Debt (Cash) (C$M):

301

Enterprise Value (C$M):

417

Last Reported Quarter:

Q1/17

Note: Net debt and EV above are based on the most recent financial results. Valuation metrics are based on CG 2017E.

FYE Dec Sales (C$M) Previous EBITDA Adj (C$M) Previous EPS Adj (C$) Previous EV/Sales (x) EV/EBITDA (x) P/E (x)

4

2016A 163.7

-

42.7

(0.18)

2.3 8.9 NM

2017E 244.5

244.0

75.0

75.4 (0.03)

0.04 1.5 5.1 NM

2018E 269.3

269.1

85.8

91.8 0.18

0.23 1.4 4.4 5.8

3.5

3

2.5

2

1.5

1

0.5

Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17

NYX S&P/TSXVentureComposite(rebased) Source:FactSet

Priced as of close of business 30 May 2017

NYX Gaming is a long tenured B2B online gaming software and content supplier that has grown into one of the leaders in content ownership following the $150 million acquisition of Cryptologic and Chartwell from Amaya and B2B sports upon the acquisition of OpenBet.

Estimates Revised

Q1/17: Watch for more margin progress

NYX Gaming showed progress in margin expansion as the company posted an adjusted EBITDA margin of 28.5%, up +4.8% sequentially and ahead of consensus at 27.1%. We consider this a step in the right direction as cost containment, amid the integration of OpenBet, appears to be taking hold. Revenue of $58.9 million was roughly in line with expectations with adjusted EBITDA of $16.8 million, ahead of consensus' $15.8 million. We have made modest adjustments to our 2017 outlook but the quarter has not dramatically changed our view on the company; the core business continues to outpace industry growth, OpenBet is meeting our expectations and adjusted EBITDA margins are poised to break through the 30% marker this year, which we think is important to illustrate that management is executing. The stock is likely one or two quarters away from winning back the hearts and minds of investors but we consider Q1/17 as potentially the start of a trend. NYX could be an M&A target, which may be a reason to buy ahead of the next quarter when margin turnaround is on show. We remain BUY rated with a $3.00 target based on 10.5x 2017E EV/EBITDA, a discount to peers at 11.7x.

Investment highlights

? Financials making progress. As noted, the quarter delivered in line revenue and

better-than-expected adjusted EBITDA. The 4.8% sequential improvement in adjusted EBITDA margin was a step in the right direction, and we think it could represent the start of a trend that sees an out of favour stock come back into favour.

? Key segments met expectations. The core business continues to deliver better than

industry growth, posting a +17.3% organic YoY increase in revenue in Q1/17; OpenBet met our expectations, which we view as positive. We note that the company is exiting its non-core B2C social casino business (formerly Zen Entertainment) to focus on B2B.

? Launching "SkinnyBet" or "OpenBet Lite". When NYX first acquired OpenBet, we

speculated that taking the product down market to mid-sized operators represented a meaningful cross-sell opportunity. Management today confirmed that it plans to deploy a product available to mid-tier customers in 2018, which aligns with when we believed the company would first address that opportunity.

? NYX Gaming may be an M&A target. NYX Gaming trades at 5.1x 2017E EV/EBITDA,

which may make it a target in an industry trading at a peer average of 11.7x 2017E EV/EBITDA. There was reportedly significant interest in OpenBet from strategic and financial buyers. Given the low valuation, we would not be surprised if B2B operators were not having conversations internally about a potential offer.

Valuation

We remain BUY rated with a C$3.00 target based on a multiple of 10.5x 2017E EV/ EBITDA, a discount to peers at 11.7x. Our 2017E revenue and adjusted EBITDA, which drives valuation, are largely unchanged though we have lowered our adjusted EPS outlook following Q1/17 results on higher-than-expected interest charges and a foreign exchange loss. The stock trades at 5.1x 2017E EV/EBITDA; we view the steep discount to peers as unwarranted given the growth profile of its content business, its long-tenured (and sticky) OpenBet customers, and management with significant ownership.

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX) The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein.

For important information, please see the Important Disclosures beginning on page 6 of this document.

NYX Gaming Group

Estimates Revised

One down, at least one to go

NYX Gaming reported largely as expected results given that management had already provided guidance alongside its Q4/16 results in April. Revenue of $58.9 million slightly exceeded consensus of $58.2 million and adjusted EBITDA of $16.8 million was just ahead of the Street at $15.8 million. The company clawed back some of the adjusted EBITDA margin compression experienced in Q3/16, delivering 28.5% (consensus 27.1%) but it is not yet above the 30% threshold. Nonetheless, we view the financials as a step in the right direction, and we think this quarter marks the first in what investors may consider as a trend though management must still deliver another quarter or perhaps a third before the harshest of skeptics are willing to step in.

That is not to suggest that we do not see value in the stock. At current levels we consider NYX Gaming as undervalued; it trades at only 5.1x our 2017E EV/EBITDA against peers nearer to 11.7x, including Playtech, which trades at 9.1x. At current levels we would be unsurprised if potential buyers are considering taking a look at NYX Gaming for its OpenBet asset and for its large library of content distributed through its award-winning software platform. Management needs to show that it can execute on its strategy and show continued margin expansion but in the meantime we think investors can build a position at a low valuation and could see a near-term reward if NYX is a target rather than an acquirer.

Figure 1: Q1/17 financial results

Q 1/17A

QoQ %

Cons Est

CG Est

QoQ %

Revenue (000's) Gross Profit Gross Margin (%) Adjusted EBITDA

Adjusted EBITDA margin Adjusted EPS - Diluted1

58,923 52,073 88.4% 16,802 28.5%

(0.07)

8.1% 8.2% 0.1% 30.0% 4.8% (261.7%)

58,175 -

15,750 27.1%

0.00

748 1,052 1.4% (0.07)

58,711 51,999 88.6% 15,920 27.1%

(0.02)

7.7% 8.0% 0.2% 23.2% 3.4% (8.2%)

212 74

(0.2%) 882 1.4%

(0.05)

1 - Excludes the $9.9M gain associated with the derivative fair value adjustment

Source: Company Reports, Bloomberg, Canaccord Genuity Estimates

Core is strong. OpenBet is meeting our expectations. Management again reported that its core business of content and software platforms continue to organically grow sales by double digits, up +17.3% YoY. It also noted that there are 28 companies in the deployment pipeline, to which it added 11 this quarter and deployed to six customers in Q1/17. Management indicated that the development contract for William Hill is starting to bear fruit which should help margins throughout the year as expenses start to offset against development revenues. Management has been clear that margin expansion will be gradual and the message seems to be indicating a low to mid-30% range in the medium term. In our view, continued progress in margin improvement should start to win back investor support.

SkinnyBet is on the horizon. When NYX first acquired OpenBet, we speculated that taking the product down market to mid-sized operators represented a meaningful cross-sell opportunity. Management today confirmed that it plans to deploy a product available to mid-tier customers in 2018, though we suspect that Matt Davey is encouraging the team to work faster. We had previously modeled its first mid-sized customer coming onboard in 2018 so today's announcement aligns with our expectation. Strategically this makes a lot of sense as the company has relationships with numerous mid-sized operators.

2 Buy unchanged Target Price C$3.00 unchanged | 30 May 2017

Gaming Technology 2

NYX Gaming Group

Estimates Revised

Catalysts largely execution-centric, M&A possible. As noted in our review of Q4/16, we believe that upcoming potential catalysts for the stock largely focus on the financial performance of the company. This quarter showed that management is starting to reclaim some of the margin that was lost in Q3/16. All eyes should now turn to Q2/17E as the next likely sign that management is righting the ship but these results are not expected until August 2017 which means a long wait. In the meantime, there could be progress on management's stated intention of simplifying the capital structure; we would consider this as a step in the right direction but may not be enough to move the stock. An outside contender for an upcoming catalyst could be online B2B software and content providers considering NYX Gaming as a target. The company trades at an attractive 5.1x 2017E EV/EBITDA, which would be accretive to many companies in a segment that trades at an average of 11.7x 2017E EV/EBITDA. There were reportedly numerous suitors for OpenBet including financial and strategic buyers so they may be kicking the tires. This could be a near-term catalyst and a represents a reason to own the stock while waiting for evidence of a rebound in margins.

Changes to estimates. Following Q1/17 results, we have adjusted our forecast to reflect the quarter and management commentary. While revenue for the quarter was consistent with our estimates, we have slightly increased our top-line forecast to account for the deprecation of the Canadian Dollar against the British Pound, which we expect to further boost Q2/17E results. During the call, management reiterated that its longer-term adjusted EBITDA margin target is within the mid-30% range; however, this progression will likely be somewhat slower than we initially forecasted and therefore we have moderated our margin expansion forecast throughout 2017E and 2018E. The significant decrease in our 2017E adjusted EPS estimate is largely due to Q1/17 results. We were expecting an adjusted net loss of $2.4 million versus the actual Q1/17 adjusted loss of $7.3 million. The delta was attributable to interest costs that were $2.1 million above our estimate, a $1.3 million foreign exchange loss and $1.5 million of other expenses. We do not include derivative fair value adjustments in our adjusted EPS calculation.

Figure 2: Changes to estimates

Q2/17E (New)

Q2/17E (Previous)

2017E (New)

2017E (Previous)

2018E (New)

2018E (Previous)

CG forecast Revenues (000's) Revenue growth YoY Gross margins Adjusted EBITDA Adjusted EBITDA margin Adjusted EPS1

60,524 71.9% 88.6%

18,432 30.5% (0.00)

59,120 67.9% 88.9%

18,409 31.1% 0.00

244,492 49.3% 88.9%

75,029 30.7% (0.03)

243,986 49.0% 89.2%

75,351 30.9% 0.04

269,345 10.2% 89.2%

85,807 31.9% 0.18

269,135 10.3% 89.5%

91,821 34.1% 0.23

Consensus forecast Revenues (000's) Revenue growth YoY Adjusted EBITDA Adjusted EBITDA margin Adjusted EPS

60,475 72%

17,077 28.2% 0.01

242,000 47.8% 71,400 29.5% 0.07

1 - Excludes the $9.9M gain associated with the derivative fair value adjustment Source: Company Reports, Bloomberg, Canaccord Genuity Estimates

259,000 7.0%

85,300 32.9%

0.14

3 Buy unchanged Target Price C$3.00 unchanged | 30 May 2017

Gaming Technology 3

NYX Gaming Group

Estimates Revised

Valuation

We consider NYX Gaming to be an undervalued stock, and we would be unsurprised if potential buyers are kicking the tires. We remain BUY rated with a C$3.00 target based on a multiple of 10.5x 2017E EV/EBITDA, a discount to peers at 11.7x. The stock trades at 5.1x 2017E EV/EBITDA. We view the steep discount to peers as unwarranted given the growth profile of its content business, its long-tenured (and sticky) OpenBet customers, and a management team with a significant ownership position. Near term, NYX Gaming may be a target given the significant interest in OpenBet from financial and strategic buyers.

4 Buy unchanged Target Price C$3.00 unchanged | 30 May 2017

Gaming Technology 4

NYX Gaming Group

Estimates Revised

Figure 3: Comparable valuation analysis

Company

TICKER

Market Cap Price

($ mm)

EV/S C2016 C2017E C2018E

EV/EBITDA C2016 C2017E C2018E

C2017E/C2016

P/E

YoY Growth

C2016 C2017E C2018E Revenue EBITDA EPS

Gaming and Lottery Technology Vendors

888 HOLDINGS PLC

888

? 2.86

ADESSO AG

ADN1

58.70

AINSWORTH GAME TECHNOLOGY LT AGI

A$ 2.19

ARISTOCRAT LEISURE LTD

ALL

A$ 21.01

EVOLUTION GAMING GROUP

EVO Kr 409.00

INTERNATIONAL GAME TECHNOLOG IGT

$ 17.84

INTRALOT S.A.-INTEGRATED LOT

INLOT

1.12

KAMBI GROUP PLC

KAMBI Kr 87.25

NETENT AB NYX GAMING GROUP LTD1

NETB NYX

Kr 71.75 C$ 1.07

PLAYTECH PLC

PTEC

? 9.89

SCIENTIFIC GAMES CORP-A

SGMS

$ 23.15

TATTS GROUP LTD

TTS

A$ 4.23

A v e r a ge

? 1,027 362

A$ 725 A$ 13,416 Kr 14,712

$ 3,611 178

Kr 2,607 Kr 14,814

C$ 116 ? 3,137 $ 2,056 A$ 6,212

Online Gaming Operators 32RED PLC 888 HOLDINGS PLC AMAYA INC1 BETSSON AB GVC HOLDINGS PLC JACKPOTJOY PLC KINDRED GROUP PLC LADBROKES CORAL GROUP PLC PADDY POWER BETFAIR PLC STRIDE GAMING PLC WILLIAM HILL PLC A v e r a ge

TTR 888 AYA BETSB GVC JPJ KINDSDB LCL PPB STR WMH

? 1.97 ? 2.86 C$ 23.82 Kr 80.15 ? 8.02 ? 5.97 Kr 91.10 ? 1.23 ? 80.95 ? 2.25 ? 2.92

? 168 ? 1,027 C$ 4,780 Kr 9,791 ? 2,383

? 440 Kr 20,964

? 2,347 ? 6,817

? 152 ? 2,505

Land-based Gaming Operators BOYD GAMING CORP LAS VEGAS SANDS CORP MGM RESORTS INTERNATIONAL MONARCH CASINO & RESORT INC PENN NATIONAL GAMING INC PINNACLE ENTERTAINMENT INC RANK GROUP PLC WYNN RESORTS LTD A v e r a ge

BYD LVS MGM MCRI PENN PNK RNK WYNN

$ 25.22 $ 58.70 $ 31.87 $ 30.20 $ 19.65 $ 19.50

? 2.20 $ 126.58

$ 2,856 $ 46,506 $ 18,317

$ 529 $ 1,790 $ 1,119

? 860 $ 12,957

Overall Average

1 - Based on CG estimates Source: Company Reports, Bloomberg, Canaccord Genuity Estimates

2.2x 1.4x 2.6x 6.7x 13.1x 2.1x 0.4x 4.3x 11.4x 2.3x 4.6x 3.5x 2.5x 4.4x

2.1x 1.2x 2.3x 5.8x 8.7x 2.3x 0.4x 3.8x 9.8x 1.5x 3.8x 3.4x 2.4x 3.6x

2.5x 2.2x 5.0x 3.0x 3.2x 2.5x 3.4x 1.9x 4.3x 3.0x 1.8x 3.0x

2.1x 2.1x 4.7x 2.7x 3.0x 2.2x 2.7x 1.4x 3.8x 1.6x 1.8x 2.5x

2.7x 4.8x 3.6x 2.5x 2.1x 2.1x 1.2x 4.6x 3.0x

3.3x

2.5x 4.5x 3.1x 2.3x 2.1x 1.9x 1.2x 3.5x 2.6x

2.8x

1.9x 1.1x 2.2x 5.2x 7.0x 2.2x 0.5x 3.0x 8.4x 1.4x 3.4x 3.3x 2.4x 3.2x

1.8x 1.9x 4.5x 2.4x 2.8x 2.1x 2.3x 1.3x 3.5x 1.4x 1.7x 2.3x

2.4x 4.3x 2.8x 2.2x 2.0x 1.9x 1.1x 3.4x 2.5x

2.6x

13.0x 16.1x 9.3x 18.6x 33.6x 6.2x 4.1x 14.8x 25.0x 8.9x 11.1x 9.1x 15.2x 14.2x

11.9x 13.4x 7.8x 14.1x 21.7x 6.8x 3.9x 14.2x 21.0x 5.1x 9.1x 8.5x 14.3x 11.7x

10.8x 11.8x 7.3x 12.6x 17.9x 6.5x 4.1x 9.7x 17.8x 4.4x 8.3x 8.1x 13.8x 10.2x

14.1x 34.1x 17.0x 35.0x NMF 8.9x NMF 30.3x 35.5x NMF 12.8x NMF 25.5x 23.7x

12.3x 26.0x 14.0x 24.6x NMF 10.5x NMF 33.7x 29.7x NMF 10.2x NMF 24.6x 20.6x

11.0x 22.0x 12.0x 21.2x NMF 9.6x NMF 19.4x 25.3x 5.8x 9.3x NMF 23.6x 15.9x

15.3x 13.0x 11.0x 10.8x 13.8x 6.5x 15.9x 8.2x 17.2x 12.2x 8.9x 12.1x

10.1x 11.9x 10.3x 11.0x 10.8x 6.4x 12.1x 7.7x 14.2x 7.3x 8.3x 10.0x

8.7x 10.8x 9.5x 10.7x 9.3x 6.0x 11.0x 6.7x 12.6x 7.4x 8.0x 9.2x

20.9x 14.1x 9.4x 12.8x 21.4x 9.4x 21.7x 13.8x 24.7x 12.1x 13.7x 15.8x

13.4x 12.3x 8.7x 13.3x 12.2x 10.8x 17.3x 10.7x 20.1x 9.7x 12.1x 12.8x

11.3x 11.0x 7.5x 12.8x 9.9x 9.7x 15.7x 8.5x 17.9x 10.5x 11.4x 11.5x

10.8x 14.3x 13.9x 9.8x 7.7x 7.8x 7.0x 17.9x 11.1x

12.6x

9.8x 12.9x 11.8x 9.0x 7.5x 7.3x 6.6x 13.5x 9.8x

10.6x

9.3x 12.4x 10.5x 8.2x 7.3x 7.1x 6.3x 12.6x 9.2x

9.4x

30.5x 24.9x 27.5x 22.0x 20.2x 17.6x 14.5x 33.5x 23.8x

21.6x

21.0x 22.8x 25.7x 20.7x 29.0x 18.4x 13.3x 26.7x 22.2x

18.7x

17.2x 21.2x 20.1x 19.3x 17.6x 15.8x 12.3x 22.0x 18.2x

15.2x

6% 15% 12% 17% 50% -6% 3% 14% 17% 49% 22% 3% 4% 16%

22% 6% 7% 14% 8% 10% 26% 40% 13% 89% 4% 22%

9% 8% 16% 5% 2% 10% 3% 31% 11%

16%

9% 20% 20% 32% 55% -9% 6% 4% 19% 76% 21% 7% 6% 20%

14% 31% 21% 43% 57% -15% 37% -10% 20% 83% 25% 35% 4% 27%

51% 9% 7% -1% 28% 1% 31% 5% 21% 68% 6% 21%

56% 14% 9% -3% 76% -13% 26% 29% 23% 25% 13% 23%

11% 11% 18% 9% 2% 7% 5% 32% 12%

18%

45% 9% 7% 6% -30% -5% 9% 25% 8%

20%

from 52wk

Hi gh

Low

-5% -2% -12% -4% 0% -44% -19% -41% -22% -64% -1% -6% -11% -18%

56% 135% 37% 66% 81%

3% 37% 18% 17% 11% 39% 187% 20% 55%

-2% -5% -15% -23% -3% -10% -5% -26% -19% -22% -17% -13%

84% 56% 40% 35% 59% 13% 25% 16% 24% 4% 24% 34%

-1% -7% -1% -1% -2% -12% -15% -2% -5%

-13%

50% 42% 50% 48% 65% 87% 22% 53% 52%

48%

Price Change (%) YTD 3 Month 6 Month 1 Year

36% 28%

4% 36% 58% -30% 11% -35%

6% -14% 20% 65%

-6% 14%

27% 13% 25% 27% 21% -34% -1% -10% -2%

1% 11% 12%

4% 7%

41% 43% 23% 40% 55% -31%

4% -27%

9% -12% 15% 57%

1% 17%

30% 114%

-9% 63% 41% -4%

7% -38% -19% -61% 22% 145%

7% 23%

37% 36% 25% -3% 30% N/A

6% 6% -8% 0% 1% 13%

-2%

50%

27%

41%

24%

22%

5%

-6%

17%

28%

3%

N/A

8%

15%

0%

-1%

-8%

-3%

1%

-5%

11%

-3%

8%

14%

33% 30% 25% -21% 41% N/A -3% -10% -11% -14% -7% 6%

25% 10% 11% 17% 42% 34% 13% 46% 25%

16%

28% 11% 21% 19% 36% 12%

4% 32% 20%

11%

34% -6% 11% 21% 48% 43% 13% 24% 24%

17%

34% 27% 39% 41% 30% 72% -14% 32% 33%

21%

2 Buy unchanged Target Price C$3.00 unchanged | 30 May 2017

Gaming Technology 5

NYX Gaming Group

Estimates Revised

Appendix: Important Disclosures

Analyst Certification

Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst's personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst's coverage universe and (ii) no part of the authoring analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.

Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Sector Coverage

Individuals identified as "Sector Coverage" cover a subject company's industry in the identified jurisdiction, but are not authoring analysts of the report.

Investment Recommendation Date and time of first dissemination: May 30, 2017, 17:49 ET Date and time of production: May 30, 2017, 17:49 ET Target Price / Valuation Methodology:

NYX Gaming Group - NYX

Our target price is based on 10.5x 2017E EV/EBITDA.

Risks to achieving Target Price / Valuation:

NYX Gaming Group - NYX

Risks to our outlook include the company's ability to acquire and retain customers in the highly competitive and fragmented gambling industry. Other risks include key executives and managers could leave or retire from the firm, the macroeconomic environment could deteriorate straining end customers. Additionally, NYX Gaming Group has partnered with third parties for content and has formed a joint venture in the US. These agreements are subject to cancellation or suspension due to unforeseeable events. NYX Gaming may not be able to find a suitable replacement vendor which could be an impediment to its ongoing business. Gaming remains a regulated industry which is subject to change from time to time which could impact NYX Gaming Group's business.

Distribution of Ratings:

Global Stock Ratings (as of 05/30/17)

Rating

Coverage Universe

#

%

Buy

577

60.61%

Hold

273

28.68%

Sell

27

2.84%

Speculative Buy

75

7.88%

952*

100.0%

*Total includes stocks that are Under Review

IB Clients %

39.17% 19.78% 14.81% 68.00%

Canaccord Genuity Ratings System BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.

HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.

SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.

NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer. "Risk-adjusted return" refers to the expected return in relation to the amount of risk associated with the designated investment or the relevant issuer. Risk Qualifier SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the stock may result in material loss.

Buy unchanged Target Price C$3.00 unchanged | 30 May 2017

Gaming Technology 6

NYX Gaming Group

Estimates Revised

12-Month Recommendation History (as of date same as the Global Stock Ratings table)

A list of all the recommendations on any issuer under coverage that was disseminated during the preceding 12-month period may be obtained at the following website (provided as a hyperlink if this report is being read electronically)

Required Company-Specific Disclosures (as of date of this publication)

Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from NYX Gaming Group in the next three months.

I:B:C$5.50 01/28/15

C$7 C$6 C$5 C$4 C$3 C$2 C$1 C$0

B:C$6.00 08/10/15

Jul 14

B:C$6.50 08/28/15

Oct 14

B:C$5.00 05/23/16

NYX Gaming Group Rating History as of 05/28/2017

B:C$4.00 B:C$3.00 11/16/16 04/26/17

Jan 15

Apr 15

Jul 15

Oct 15

Jan 16

Apr 16

Jul 16

Oct 16

Jan 17

Apr 17

Closing Price

Target Price

Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)

Online Disclosures

Up-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically) ; or by sending a request to Canaccord Genuity Corp. Research, Attn: Disclosures, P.O. Box 10337 Pacific Centre, 2200-609 Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a request by email to disclosures@. The reader may also obtain a copy of Canaccord Genuity's policies and procedures regarding the dissemination of research by following the steps outlined above.

General Disclaimers

See "Required Company-Specific Disclosures" above for any of the following disclosures required as to companies referred to in this report: manager or co-manager roles; 1% or other ownership; compensation for certain services; types of client relationships; research analyst conflicts; managed/co-managed public offerings in prior periods; directorships; market making in equity securities and related derivatives. For reports identified above as compendium reports, the foregoing required company-specific disclosures can be found in a hyperlink located in the section labeled, "Compendium Reports." "Canaccord Genuity" is the business name used by certain wholly owned subsidiaries of Canaccord Genuity Group Inc., including Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated company that is 50%-owned by Canaccord Genuity Group Inc.

The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with principal offices located in Sydney and Melbourne.

The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon (among other factors) the Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Investment Banking activities, or to recommendations contained in the research.

Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising as a result of publication or distribution of research. This research has been prepared in accordance with Canaccord Genuity's policy on managing conflicts of interest, and information barriers or firewalls have been used where appropriate. Canaccord Genuity's policy is available upon request.

The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with the exception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity, its affiliated companies or any other person as to its fairness, accuracy, completeness or correctness. Canaccord Genuity has not independently verified the facts, assumptions, and estimates contained herein. All estimates, opinions and other information contained

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in this research constitute Canaccord Genuity's judgement as of the date of this research, are subject to change without notice and are provided in good faith but without legal responsibility or liability.

From time to time, Canaccord Genuity salespeople, traders, and other professionals provide oral or written market commentary or trading strategies to our clients and our principal trading desk that reflect opinions that are contrary to the opinions expressed in this research. Canaccord Genuity's affiliates, principal trading desk, and investing businesses also from time to time make investment decisions that are inconsistent with the recommendations or views expressed in this research.

This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated investments discussed herein in any jurisdiction where such offer or solicitation would be prohibited. As a result, the designated investments discussed in this research may not be eligible for sale in some jurisdictions. This research is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to clients and does not have regard to the investment objectives, financial situation or particular needs of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. To the fullest extent permitted by law, none of Canaccord Genuity, its affiliated companies or any other person accepts any liability whatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.

Research Distribution Policy

Canaccord Genuity research is posted on the Canaccord Genuity Research Portal and will be available simultaneously for access by all of Canaccord Genuity's customers who are entitled to receive the firm's research. In addition research may be distributed by the firm's sales and trading personnel via email, instant message or other electronic means. Customers entitled to receive research may also receive it via third party vendors. Until such time as research is made available to Canaccord Genuity's customers as described above, Authoring Analysts will not discuss the contents of their research with Sales and Trading or Investment Banking employees without prior compliance consent.

For further information about the proprietary model(s) associated with the covered issuer(s) in this research report, clients should contact their local sales representative.

Short-Term Trade Ideas

Research Analysts may, from time to time, discuss "short-term trade ideas" in research reports. A short-term trade idea offers a nearterm view on how a security may trade, based on market and trading events or catalysts, and the resulting trading opportunity that may be available. Any such trading strategies are distinct from and do not affect the analysts' fundamental equity rating for such stocks. A short-term trade idea may differ from the price targets and recommendations in our published research reports that reflect the research analyst's views of the longer-term (i.e. one-year or greater) prospects of the subject company, as a result of the differing time horizons, methodologies and/or other factors. It is possible, for example, that a subject company's common equity that is considered a longterm `Hold' or 'Sell' might present a short-term buying opportunity as a result of temporary selling pressure in the market or for other reasons described in the research report; conversely, a subject company's stock rated a long-term 'Buy' or "Speculative Buy' could be considered susceptible to a downward price correction, or other factors may exist that lead the research analyst to suggest a sale over the short-term. Short-term trade ideas are not ratings, nor are they part of any ratings system, and the firm does not intend, and does not undertake any obligation, to maintain or update short-term trade ideas. Short-term trade ideas are not suitable for all investors and are not tailored to individual investor circumstances and objectives, and investors should make their own independent decisions regarding any securities or strategies discussed herein. Please contact your salesperson for more information regarding Canaccord Genuity's research.

For Canadian Residents:

This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this research and its dissemination in Canada. Canaccord Genuity Corp. is registered and regulated by the Investment Industry Regulatory Organization of Canada (IIROC) and is a Member of the Canadian Investor Protection Fund. Canadian clients wishing to effect transactions in any designated investment discussed should do so through a qualified salesperson of Canaccord Genuity Corp. in their particular province or territory.

For United States Persons:

Canaccord Genuity Inc., a US registered broker-dealer, accepts responsibility for this research and its dissemination in the United States. This research is intended for distribution in the United States only to certain US institutional investors. US clients wishing to effect transactions in any designated investment discussed should do so through a qualified salesperson of Canaccord Genuity Inc. Analysts employed outside the US, as specifically indicated elsewhere in this report, are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

For United Kingdom and European Residents:

This research is distributed in the United Kingdom and elsewhere Europe, as third party research by Canaccord Genuity Limited, which is authorized and regulated by the Financial Conduct Authority. This research is for distribution only to persons who are Eligible Counterparties or Professional Clients only and is exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the United Kingdom only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) (High Net

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