I use Bank Of America Investment Services to do all my trades, the Analyst for the bank releases "client notes" to us at no charge. They have a Strong Buy at this time. They also had today (March 26th) as earnings release but that did not happen. I called and a trader told me it could be another 10 day's as per their records. The advantage GPIC has over Shuffle Master is the large global sales. The company is fairly "new" and so the analysts don't have that many quarters to work with yet. I say go long untl earnings.
This is a link to a slide presentation from the Q3 report.
Subtracting out Q1-Q3 numbers, they're sales are pointing to $17M, which would result in $0.13 EPS for Q4.
I think they are lowballing a bit, since sales have been increasing 4 consecutive qtrs, and Q4 is seasonally strong based on past data. I plugged in $21.6M (using the same ratios that GPI guessed for G&A, COGS, etc) and came up with $0.16. While this is lower than Q405, the operating income (before the tax credits/expenses), is $0.30 vs $0.17. Q405 gave a huge tax credit which made it look as if it were abnormally profitable. COGS definitely took a hit temporarily with GPI-SAS's initial production of RFID, but this will even out. Gross margin was 30% in Q3-06, but we are typically at 35-45%. Should this come back up (we get more efficient), and FY07 EPS may be in the $1.40 range. 2005 was at $0.53, 2006 may be at $0.70-$0.80. So not a bad increase. I assumed FY07 total sales were at $94M (vs $79M in 2006). So just a relatively small increase in sales will make EPS jump due to a larger scale of operations.
As far as a sale, I agree that IGT would be a good candidate. Ms Carrette and Endy own greater than 50%. With Endy and Charlier leaving in September, this may makes a good opportunity to be open to bids. Maybe even a private equity deal (like Harrah's) may be possible. With RFID, GPI is a cash cow for a little while. No debt, means private equity could borrow against for easy cheap cash.
If sales stall in Asia or RFID loses acceptance, GPI may not be as appealing for a while. My guess is a takeover/sale either in Sept (when share prices are seasonally high) for $32-38, depending on sales and EPS. I'm sure Ms Carrette doesn't want to hold this forever. She didn't even make it to the annual meeting. She could sell her personal stake for $100-150M, rather than risk some unfortunate industry downturn. We all know Endy wants to sell his remaining 250k shares. Maybe a 10-15% premium over the going share price at the time. After September, prices tend to fall. Part of this may be the GPI-SAS "holiday" limiting production in Q3 and length of time to Q4 release after Q3 results.
Any thoughts on this stuff? Anyone going to annual meeting in May? (they gave me a hat last year and nice tour)
(sorry for the rambling) - good luck next week!
Great post - a private equity buy out could also be possible in the current environment.
I thought Charlier was already out end of last year. Where do you see that Endy has an agreement that expires in September?
With regard to Mme. from France - how involved has she ever been in the business? The announcement after her husband's death made it seem like she was quite the active business woman. Has she been largely absent from the scene? Just trying to guage where she may be on selling it all....