This exciting ASX small cap could almost double in value according to Morgans

Betr Entertainment Ltd (ASX: BBT) released its quarterly results earlier this week, showing it had had a steady, if unexceptional, three months.

Earnings outlook in place

The company said in its statement to the ASX that revenue had increased 2% to $383 million compared with the same period the previous year, while for the first nine months of the year, revenue was up 16.6% to $1.19 billion.

Betr said it reaffirmed its EBITDA outlook for the second half to $5 to $8 million and for $13 to $19 million in FY27.

The company also said it was attracting new customers, with 35% of customers being new depositors in the quarter, which followed a brand relaunch.

Betr also said it had streamlined its operating model, with $6 million in annualised efficiencies realised during the quarter.

The company added further re the result:

Net cash outflows from operating activities (including corporate costs) were $8.9m. This included the tail of cash outflows associated with the marketing heavy December quarter, together with $2.0m of final costs relating to discontinued US operations, and $0.9m of non-recurring costs associated with initiatives to reduce the Group’s ongoing operating cost base. • Excluding these non-recurring items, underlying operating cash outflows were materially lower than the reported result, reflecting improving operating leverage and benefits from cost actions implemented during the quarter.

The company said it expected to have a “materially improved cash flow profile” as the full effect of cost-saving measures came into play.

Shares looking cheap

Morgans’ analysts ran the ruler over the quarterly result and liked what they saw.

The Morgans team said the quarter marked a “solid sequential improvement”.

Encouragingly, margins have normalised following the customer-friendly Spring Carnival period in Q2, and the business looks well placed to achieve its H2 targets. The one real negative was the cash position at period end, though this was impacted by a number of one-off items that won’t recur in Q4. With the internal focus firmly on value-generating customers, a leaner cost base now in place, and the streamlining of operations largely complete, we remain optimistic about the path ahead.

The Morgans team said they believe that Betr is trading “well below fair value and looks compelling at current levels”.

They said Betr has a proven management team, scalable proprietary technology, and a solid track record of executing value-accretive acquisitions.

Morgans has a price target of 35 cents on Betr shares compared with 18 cents currently, implying potential upside of 94.4%.

Betr is valued at $187.4 million.

The post This exciting ASX small cap could almost double in value according to Morgans appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.