GGRAsia – Digital likely good 2H growth story for Sci Games: DB

Digital likely good 2H growth story for Sci Games: DB

Jul 27, 2020 Newsdesk Latest News, Top of the deck, World

The social games segment and other digital content is “likely to produce strong second-half 2020 growth” for casino equipment and lottery services group Scientific Games Corp, said a Friday note from Deutsche Bank Securities Inc.

The institution noted that although Scientific Games’ group-wide second-quarter adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) were “down materially” by circa 64 percent, business performance had been “somewhat offset by the social gaming and digital segments”.

The technology firm had reported its second-quarter numbers on Thursday. Scientific Games said its second-quarter net loss attributable to shareholders widened to US$203 million, from US$77 million a year earlier,

Nonetheless, the group’s specialist digital product unit SciPlay, saw its revenue rise 40.7 percent year-on-year in the three months to June 30.

Deutsche Bank analysts Carlo Santarelli and Steven Pizzella said in their note that there would be “tougher” comparisons ahead for 2021 due to the “stay-at-home outperformance” in terms of consumers using the digital products during the Covid-19 emergency, which saw the temporary shuttering of many casinos globally during the second quarter.

That tougher 2021 comparison outlook would be likely to be “mitigated somewhat” in the United States market “by the return of sports and new states coming online”, the analysts added.

Mr Santarelli and Mr Pizzella added: “Net-net, we expect an environment that remains challenging for Scientific Games, though we believe the second quarter 2020 represented the operational trough.”

But they further noted: “We struggle to garner much comfort in the equity given the financial leverage and our view that free cash flow is likely to remain spotty on a quarterly basis, thereby stunting the efforts to reduce debt.”

Scientific Games’ net debt as of June 30 was nearly US$8.53 billion, from US$8.65 billion a year earlier.