SGMS
Scientific Games Corp
Consumer, TMT
12/05/2014
Presented
| Date | 12/03/2014 |
| Price | $15.03 |
| Market Cap | $1.27B |
| Ent Value | $4.36B |
| P/E Ratio | N/A |
| Book Value | $1.25 |
| Div Yield | N/A |
| Shares O/S | 0.00M |
| Ave Daily Vol | 1,650,000 |
| Short Int | 13.01% |
Current
| Price | $94.21 |
| Market Cap | $8.36B |
| Scientific Games Corporation provides technology-based products and services, and associated content for gaming and lottery markets worldwide. The company operates in three segments: Instant Products, Lottery Systems, and Gaming. The Instant Products segment designs, prints, and sells instant lottery tickets; and provides value-added services, such as game design, sales and marketing support, specialty games and promotions, inventory management and warehousing, and fulfillment services. This segment also offers licensed games, promotional entertainment, and Internet-based services, as well as prints and sells phone cards. The Lottery Systems segment provides customized computer software, software support, equipment, and data communication services to lotteries. Its products include transaction-processing software, draw lottery games, keno, point-of-sale terminals, central site computers, and communication platforms, as well as ongoing operational support and maintenance services. In addition, this segment offers instant game validation systems; and software, hardware, and related services for sports wagering and keno systems. The Gaming segment leases or provides gaming machines, server-based gaming systems and content, as well as sells new and used gaming machines, conversion kits, and parts to commercial, tribal, and governmental gaming operators. This segment also offers video lottery central monitoring and control systems and networks for gaming regulators; and interactive services, including social gaming and game content for real-money gaming Websites, for desktop and mobile devices. Scientific Games Corporation was founded in 1984 and is based in New York, New York. |
Publicly traded companies mentioned herein: Scientific Games Corporation (SGMS), International Game Technology (IGT), GTECH SpA (GTK IM)
Highlights
The presenter characterized Scientific Games (SGMS) as the “hard 8” in his portfolio. He is long the stock and likes its recent acquisitions of WMS and Bally as well as its share gains, but admitted that the amount of leverage (~$8.5 billion of debt) is a risk. The $3.3 billion acquisition of Bally just closed, and pro forma he sees SGMS as capable of generating at least $1.3-1.4 billion of EBITDA and $250-300 million of FCF annually. SGMS is now 2/3 gaming, 1/3 lottery, and a legitimate “one-stop-shop” for casino customers (WMS never had good back end slot software, and Bally provides that). With a more complete product offering and a 20%+ FCF yield, the presenter thinks the risk/ reward is skewed to the upside (based on his model, an expansion of one multiple point on EBITDA is worth $23 to the stock).
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