Brokerage Daiwa Securities Group Inc has initiated coverage of Japan Cash Machine Co Ltd (JCM) with a ‘neutral’ rating.
JCM, a firm listed on the Tokyo Stock Exchange, is a supplier of cash handling technology and ticket printers – including equipment for the global gaming market – and is also known as JCM Global.
The ‘neutral’ rating “mainly reflects prospects for an earnings slump amid a slowdown in the overseas casino and domestic gaming markets,” wrote Daiwa analyst Yusuke Miura in a report issued on Monday looking at Japan’s cash handling technology sector.
“[JCM] earnings will likely remain poor for some time considering stagnation for both the overseas casino market and the domestic amusement market,” said Mr Miura.
The report nonetheless noted that JCM has a high market share for bill validators in gaming markets outside Japan, “accounting for 60 percent of the global market size and 65 percent for the U.S. market,” said Daiwa citing JCM estimates.
In September 2014, JCM Innovation Corp, a unit of JCM, announced it had completed the acquisition of FutureLogic Inc, a major U.S.-based maker of ticket printers for the gaming industry.
Casino gaming is not legal within Japan, but the country has a large industry for pachinko, an arcade-style game. JCM holds a high share of the market for bill recycling units in Japan’s pachinko and pachislot venues, according to Daiwa.
“We believe operating profit will remain flat year-on-year at JPY1.5 billion [US$14.0 million] in financial year 2016. We expect profit growth in the mainstay global gaming segment, assuming earnings growth in the printer business on sturdy sales gains in Europe. We also foresee higher sales and profit for the domestic commercial segment with currency exchange machines a driver,” said the Daiwa analyst.
“We anticipate growth in the global gaming segment. One growth driver is ticket printers, which are used in slot machines to dispense tickets [for cash credits] in place of coins. The use of such coinless systems has become mainstream in the global gaming market,” added Mr Miura.
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