Scientific Games Extends Contract - Analyst Blog
21 6월 2011 - 7:15PM
Zacks
Scientific Games Corp.
(SGMS) recently signed a five-year
contract extension agreement with Georgia Lottery Corporation.
Under the terms of the contract,
Scientific Games will serve as the primary vendor supplying instant
tickets and related services including game design, marketing,
warehousing and distribution up to 2018.
Scientific Games will continue to
generate revenues based on a percentage of instant ticket retail
sales. In fiscal 2010, Georgia Lottery Corporation generated over
$3.6 billion in retail sales, of which $2.4 billion were derived
from instant ticket game sales.
Instant ticket sales have been a
steady revenue stream for Scientific Games over the last few
quarters. At the end of fiscal 2010, Scientific Games was the
leading supplier of instant tickets and related services to more
than 35 US states.
In the first quarter ended March,
2011, the company earned revenues of $113.9 million, up 3.5% year
over year. We believe the extended contract will boost instant
ticket sales growth going forward.
In separate news, Sciplay
International SARL, a joint venture between Scientific Games
and Playtech Limited (PYTCF), was
selected by the California Online Poker Association (COPA) to
provide intrastate Internet poker services.
California is currently considering
a legislation to authorize and license intrastate Internet poker
offerings. As a part of this process, COPA aided by
Sciplay is expected to launch a website in the latter half
of 2011, which will provide players the opportunity to improve
their skills for free.
We believe the agreement with COPA
will augment the company’s revenue going forward. At the end of
fiscal 2010, Scientific Games was the exclusive provider of online
systems in approximately 10 US states. We believe that the
Internet-based lottery business has strong growth potential and
Scientific Games is well positioned to grab this opportunity over
the long term.
Recommendation
We maintain our Neutral rating over
the long term (6-12 months). We believe the divestiture of the
racing business and large contract re-pricings will help Scientific
Games to focus on its core business (lottery and gaming).
We also believe the company’s
diversified product offerings; international development activities
(China, Italy), recurring revenue business model and strong growth
from the Internet-based business will drive the stock over the long
term.
However, weak first quarter
results, intense competition from International Game
Technology (IGT), a leveraged balance
sheet and a slowing trend in China will continue to temper
near-term results.
Currently, Scientific Games has a
Zacks #3 Rank, which implies a short-term Hold rating.
INTL GAME TECH (IGT): Free Stock Analysis Report
SCIENTIFIC GAME (SGMS): Free Stock Analysis Report
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