* Q3 EPS C$0.42 vs C$0.02 a yr ago
* Revenue up 13.7 pct to C$355.7 mln
* Secondary offering by Bain Capital (Adds secondary offering and updates share price to close)
TORONTO, Dec 8 (Reuters) - Dollarama Inc (DOL.TO), Canada's largest operator of dollar stores, reported a big jump in quarterly profit on Wednesday as increased sales coupled with lower interest expenses helped lift its results.
Montreal-based Dollarama said net income in the third quarter, ended Oct. 31, rose to C$31.3 million ($31 million), or 42 Canadian cents a share, from a year-earlier profit of C$1.1 million, or 2 Canadian cents a share.
The company said sales rose 13.7 percent to C$355.7 million, driven largely by the net addition of 16 new stores in the quarter and by same-store sales growth of 8 percent.
Analysts, on average, had expected earnings of 38 Canadian cents a share on revenue of C$351.5 million, according to Thomson Reuters I/B/E/S.
"While at the high end of the comparable valuation range, Dollarama deserves a premium value based on its industry-leading growth, profitability and dominant market position," Versant Partners analyst Neil Linsdell said in a research note. Linsdell raised his share price target to C$36 from C$31.
Dollarama, which went public in October 2009, has seen its shares rise 31.5 percent year-to-date.
"Dollarama is one of the few publicly traded retailers in Canada reporting strong growth in sales and earnings, driven by both network growth and same-store sales growth," Desjardins Securities analyst Keith Howlett wrote in a note. He said the stock could be added to the TSX composite index as early as Dec. 17.
The results initially sent Dollarama shares 2.4 percent higher before investors took profits. The shares closed 31 Canadian cents lower at C$29.08 on the Toronto Stock Exchange on Wednesday.
Dollarama, which had one of Canada's largest IPOs last year, also said key stakeholder Bain Capital has agreed to sell some 11.2 million shares in a secondary offering for C$29 each.
Bain also sold a chunk of Dollarama shares in April, priced at C$24.60 per share.
After giving effect to the latest offering, but before giving effect to an over-allotment option for another 1.68 million shares, Bain Capital will own a 14.8 percent stake.
Dollarama will not receive any proceeds from the offering, which is being jointly led by an underwriting syndicate comprising RBC Capital Markets, CIBC World Markets and Scotia Capital.
$1=$1.01 Canadian Reporting by Solarina Ho, Euan Rocha and Pav Jordan; editing by Peter Galloway