Scientific Games Corp “is already executing on some synergies” following the acquisition of Bally Technologies Inc, said brokerage firm Wells Fargo Securities LLC.
Scientific Games, a U.S.-based specialist in lottery equipment and management, in November completed the acquisition of slot maker Bally Technologies, based in Las Vegas, in a deal worth US$5.1 billion.
“The quick realisation of synergies is necessary for Scientific Games to generate cash and de-lever swiftly,” a group of Wells Fargo analysts led by Cameron McKnight wrote in a report on Thursday.
They added: “We believe Scientific Games is already making progress with its synergy programme. Checks suggest Scientific Games began streamlining its cost structure in mid-December. We believe decisions on headquarters, headcount and production facilities could occur in Q1 and serve as positive short-term catalysts.”
Scientific Games has said it expects synergies arising from the integration of Bally Technologies will lead to US$235 million in cost savings. The firm plans to realise about 80 percent of those savings by the end of 2015, Wells Fargo said.
“While we believe the roughly US$130 million of headcount-related synergies is tangible, there is less visibility regarding the remaining US$105 million of non-headcount related synergies,” the brokerage noted.
Well Fargo downgraded Scientific Games from ‘Outperform’ to ‘Market Perform’ but maintained its US$12 to US$13 valuation range.
“We see balanced risk/reward here given generally low near- to medium-term visibility,” the analysts said. “If Scientific Games can execute on its synergy targets and gaming equipment industry fundamentals stabilise, we see a potential path to US$20/share.”
But they cautioned: “However, with 7x net leverage, we also see a potential case for US$7/share on any potential setbacks.”
Wells Fargo advised investors to move to the sidelines until the investment case and fundamental outlook becomes clearer, “which could occur late 2015”.
Jan 16, 2018Casino gross gaming revenue (GGR) in Macau’s VIP segment expanded by 21.9 percent year-on-year in the fourth quarter of 2017, according to data released on Tuesday by the local regulator, the...
Jan 16, 2018
Dec 29, 2017It could be 2024 before a casino resort is opened in Japan,...
Dec 27, 2017The year 2017 could prove to have been a turning point in...
Oct 25, 2017The deployment of radio frequency identification (RFID)...
”On gaming tables [for MGM Cotai], we are still waiting for the [Macau] government to give us our final award”
Chief executive of Macau-based casino operator MGM China Holdings