A leader in designing, manufacturing and marketing games, International Game Technology (IGT) was recently chosen by Carson City, Nevada-based Casino Fandango to install sbX Floor Manager in their casino floor.
sbX is the first server-based gaming solution that allows its operators to run their own choice of games any time and facilitates better casino floor management at lower operational costs. sbX also provides complete freedom to the players in terms of selecting games of their own choice instantly and experience a more real-life feel of casino management.
sbX has multiple tools, which spice up the entire gaming experience. sbX Service Window provides unique player interaction experience at the slot machine. The window provides options regarding information and services that the players and operators can optimize. sbX Floor Manager allows access to the IGT game library, enabling operators to efficiently mange their casino floor with the mere touch of a button.
IGT Floor Manager integrates seamlessly with IGT's AVP machine models. Floor Manager is expected to be activated on 300 machines at Fandango and the casino will have full access to new game launches.
Casino Fandango’s management believes that installing sbX will augment its competitive edge due to the flexibility and diversified management functionality that the system provides.
IGT plans to expand sbX both domestically and internationally, thereby driving growth. More than 40 casinos in 10 countries have already partnered with IGT for this server-based technology.
In April 2011, IGT signed an agreement to install sbX at the Enjoy Group’s Casino Rinconada de Los Andes in Chile. We anticipate that the broadening customer base will boost IGT’s top-line growth over the long term.
The casino sector continues to face macroeconomic concerns due to high unemployment levels. This has led many casino operators to reduce their costs, resulting in a slower machine replacement cycle in an attempt to preserve their liquidity. This trend appears to be hurting IGT’s growth outlook.
Sluggish replacement sales will remain a primary headwind for IGT in the near term. However, we expect demand for sbX to remain high both domestically and overseas due to its cost effectiveness.
Most recently, IGT announced its intention to acquire Stockholm-based Entraction Holding AB for a cash consideration of approximately $115.0 million (approximately $11.11 per share).
The acquisition of Entraction is expected to boost IGT’s position in the legalized interactive gaming market. Moreover, addition of poker, bingo, casino, and sports betting will boost IGT’s interactive gaming portfolio going forward.
Recommendation
We believe that international expansion, an innovative product pipeline, focus on reducing dependency on the domestic machine replacement cycle and strong growth from the interactive business will drive significant upside over the long term.
However, sluggish macroeconomic conditions, lack of visibility on replacement sales, very few new openings and increasing competition particularly from Scientific Games Corp. (SGMS) will keep the stock range bound in the near term.
We have a Neutral recommendation on the stock over the long term (6-12 months). Currently, IGT has a Zacks #3 Rank, which implies a Hold rating on a short-term basis.
INTL GAME TECH (IGT): Free Stock Analysis Report
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