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Sci Games’ gaming segment remains a concern: DB

Nov 12, 2019 Industry Talk, Latest News, Top of the deck  

Sci Games’ gaming segment remains a concern: DB

Casino equipment and lottery services provider Scientific Games Corp reported a “solid” third-quarter performance, but the firm’s gaming segment “continues to raise concerns”. So says a Monday note from the United States-based stockbroking arm of Deutsche Bank AG.

The gaming manufacturer reported last week a third-quarter profit of US$14 million. That compared to a loss of US$352 million in the same quarter a year ago. Group-wide, consolidated adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) increased 5.5 percent to US$344 million from US$326 million in the prior-year period, it said.

In Monday’s memo, Deutsche Bank’s analysts Carlo Santarelli and Steven Pizzella said Scientific Games’ third-quarter results “delivered upside to forecasts”. They added: “Net-net, we found the results to be broadly encouraging in both the lottery and social and digital segments, while the gaming segment continues to raise concerns.”

Adjusted EBITDA in Scientific Games’ gaming segment stood at US$226 million in the three months to September 30, down 7 percent year-on-year. Revenue in the segment rose by 1 percent from the prior-year period, to US$454 million.

“Despite healthy growth in the lottery and social and digital segments, and several drivers for each segment on the horizon, with gaming segment adjusted EBITDA having contracted in each of the last four quarters, and with the segment representing [circa] 60 percent of the segment level adjusted EBITDA, we see current valuation as fair, pending an inflection in the core business,” said the Deutsche Bank analysts.

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