GGRAsia – IGT post-merger recovery continues: Telsey

IGT post-merger recovery continues: Telsey

Oct 12, 2016 Newsdesk Industry Talk, Latest News, Top of the deck

Global gaming and lottery supplier International Game Technology Plc (IGT) is continuing to push ahead with its plans to achieve financial and operational stability, says brokerage Telsey Advisory Group LLC.

“Our view is that IGT continues to progress on plan,” analysts David Katz and Brian Davis wrote in a Tuesday note.

They added: “To be clear, the plan as we understand it is to initially reduce or eliminate the declines, which should be enough to generate strong free cash flow. The notion of the company establishing a positive growth trajectory could be possible in the future, but is unlikely in the near term based on the limited demand environment in gaming equipment coupled with the competition in supply… Ultimately, we believe IGT should continue to evolve its slot offerings enough to regain a literal sense of stability.”

IGT is the result of a US$6.4-billion debt-funded merger – completed in April 2015 – between International Game Technology, a Nevada-based supplier of slot machines, and Italy-based lottery equipment specialist GTech SpA. The newly-created firm reported consolidated revenue in the second quarter of 2016 grew by 1 percent year-on-year to US$1.29 billion.

The Telsey analysts said in their note they were revising upward their estimates for IGT, following a new lottery deal in Italy for the company. The brokerage now expects the firm to report US$1.25 billion in revenue for the three months ended September 30, up by 2.5 percent in year-on-year terms.

The brokerage also forecast IGT’s slot machine sales would prove to be “up considerably” year-on-year in the third quarter of 2016.

For full year 2016, Telsey forecasts IGT’s revenue at US$5.11 billion, which would represent a 0.3 percent decline in year-on-year terms. Adjusted earnings before interest, taxation, depreciation and amortisation are likely to be US$1.78 billion, up by 4.5 percent compared with 2015, said the brokerage.

“Total debt is expected to be flat to slightly higher in 2016, while debt reduction of US$411 million should be achievable in 2017, in our view,” Mr Katz and Mr Davis wrote. They expect IGT to end 2016 with net debt of US$8.97 billion.

In a release published earlier this month, Fitch Ratings Inc said several U.S.-based gaming suppliers – including IGT – were “still nursing [a] merger and acquisition hangover”. The credit ratings agency added at the time: “The historically low leveraged U.S. gaming supplier sector will need more time to recover following the debt-funded consolidation spree over the past two to three years.”