GCA (Buy, $9.20). GCA kiosk sales are leading an early stage replacement
cycle. While domestic regional gaming revenue results have shown little upward
momentum, GCA kiosk sales, renewals, and cost discipline leave us comfortable
with our 4Q13 and CY14 cash EPS outlook. We believe GCA offers stable cash
flow, with upside optionality not yet embedded in its stock multiple. Upside
stems from its processing foothold in the online lottery business, new product
introductions, such as QuikTicket and TableXchange, and GCA’s ability to utilize
a strong balance sheet/free cash flow to prove out tuck-in, accretive acquisitions -
ahead of something potentially more transformative longer-term.
Gamblers will soon be able to use prepaid access cards to play slot machines in Nevada, a technological advancement that has some critics concerned that easier access to cash in a casino would broaden problem gambling.
The Nevada Gaming Commission on Thursday approved amendments to two regulations that would allow the use of prepaid access instruments in conjunction with approved wagering accounts.
The amendments take effect immediately, and technical standards will be published soon to guide companies. The amended regulations enable state Gaming Control Board Chairman A.G. Burnett to administratively approve the use of equipment.
New Jersey already allows the use of prepaid access cards. The company that petitioned the Gaming Control Board for regulatory changes, Las Vegas-based Sightline Interactive, has contracts with three companies there.
The changes approved by regulators would give slot players some of the same access to funds enjoyed by race and sports book gamblers and online poker players.
GCA CEO departs; Maintain Buy
Last night, GCA announced the appointment of Ram Chary as CEO. Mr. Chary formerly held high-level positions at FIS Global, eFunds and IBM Global. While we are disappointed with the departure of former head, David Lopez, our overall thesis remains - GCA is an underappreciated gaming technology company with steady free cash flow, and shares possess strong potential upside optionality via new product launches, the advancement of online wagering/lottery, and accretive acquisition opportunities.
We believe shares may trade lower off of last night’s somewhat abrupt CEO change. However, we note that GCA affirmed its CY13 EBITDA and Cash EPS guidance, and that Mr. Lopez departed on very amicable terms to lead a private gaming supplier company. We also note current CFO, Mary Elizabeth Higgins, has been more of an “operational” CFO since September 2010 (when GCA shares traded under $3), and she has now teamed with three CEO’s at GCA.
Incoming CEO Mr. Chary has helped position payment services companies, including FIS Global (FIS, Neutral, $50.38,), with the identification, execution and integration of acquisitions, and he has shouldered operational and other leadership roles with the same firms.
Post discussions with GCA management, we believe its strategic focus remains execution of client retention and acquisition, new product launches, and accretive utilization of its net cash balance sheet and steady cash flow. Given the background of Mr. Chary, we believe the longer-term acquisition focus may broaden from GCA’s previous, more gaming-centric strategy.
From today's article a buy recommendation for GCA. GLTA!!!
Fourteen stocks for 2014
Jan 07, 2014 00:03:00 (ET)
By Kirk Spano
ELM GROVE, Wisc. (MarketWatch) -- At the start of 2013, I gave you four stocks to buy. Those picks did well. Wells Fargo has run from $35 to $45; Whiting Petroleum went from the middle $40s to a high over $70; Veolia rose from $12 to over $18, and MEMC Electronics -- now SunEdison -- ran from below $4 to over $12 now.
This year, instead of four New Year's stocks, I am going to give you 14 in an attempt to create a nifty title for the start of 2014. Before I give you the goodies though, I'd like to talk about buying these stocks, or any stocks for that matter.
There are publications, services and financial people who will tell you that buying a good company's stock almost anytime is a good idea. They are wrong. Buying stocks without deeply understanding their businesses, business cycles and valuation is a recipe for buying high, increasing risk and sabotaging returns.
Not all the stocks of the companies on my list are outright buys right now. All, however, are stocks that I feel are at near 50% discounts to their intermediate-term intrinsic value -- which means I am likely to be a buyer once any downward momentum has stopped.
The 50% discount I seek is the margin of safety that I require to buy stocks. That margin gives me a very good chance to at least double my money in the three- to seven-year time frame that I use, while insulating me from major losses. I suggest that any stock you invest in pass that test.
Since none of us can know everything, there will be good stocks that we miss. That's okay. We do not need to catch every opportunity, we simply want to add to our risk-adjusted returns over time by finding a handful of great investments, while avoiding big losers. As Peter Lynch said, "All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from
Sentiment: Strong Buy
GCA’s agreement to provide MGM with core cash access services as well as ticket redemption kiosks and services to MGM properties lowers its renewal risk profile and augments its customer acquisition upside potential, in our view. MGM represents a top-5 core cash access customer renewal for GCA, and we believe its new redemption kiosk agreement is worth ~$5m to $8m in additional CY14 revenue to GCA.
The agreement to provide MGM (Buy, $23.15) with core cash access services represents a key, top-5 core cash access renewal for GCA. Agreements typically last 3 to 5 years, and as such, GCA’s risk profile is lowered.
While GCA’s MGM master renewal agreement was somewhat telegraphed given a previously announced contract for GCA to provide cash access services and kiosks to Aria (formerly an outlier non-GCA MGM customer property), it is still a significant positive in terms of LT risk mitigation and provides accretive revenue from kiosk sales. We believe CY14 kiosk sales to MGM will be ~$5m to ~$8m and accretive, despite the likelihood of volume discounting.
The MGM agreement also supports other customer acquisition discussions, including those with partial GCA customer CZR (No rating, $21.03), in our view. The broadening of GCA’s kiosk technology, coupled with its core cash access services, is helpful with overall patron Strip movement data, which CZR values. The kiosk agreement with MGM also shows continued momentum in a largely overlooked casino cash access kiosk technology replacement cycle, and sets a more significant footprint in a key customer's facilities for add-on technology products.
The renewal economics of the MGM core cash access deal is likely at slightly lower margin than the last one. However, with kiosks and likelihood of higher CY14 vs CY13 volume at MGM facilities, we believe the full MGM deal to be additive to our CY14 earnings outlook. GCA typically provides a detailed initial outyear guidance outlook on its 4Q earnings call.
Other. Online lottery progress continues with the a roll-out of instant tickets online in North Carolina and Minnesota. Recall GCA has an agreement with SGMS, the largest instant ticket provider to the US lottery, to provide online payment service and integrated wallet functionality.