Why EGT will NOT be taken private:
1. MELCO already controls the company, the BOD, the CEO and therefore, EGT's cash.
2. If Melco takes EGT private, they will not recover their investment dollars, they will simply be moving money from one pocket to another and paying off the other shareholders of a company that they already completely control - so no financial incentive that I can think of, can you?
3. I predict that EGT, as it exists today, will continue to be dismantled. You may recall that the Medical and Automotive divisions of Dolphin were sold earlier and the boutique Casino was sold (at a loss). The rest of Dolphin was sold to GPIC because of a breach of contract lawsuit brought by GPIC that was hamstringing Dolphin's ability to sell RFID chips (see 10K for details).
4. All three PI venue contracts come up for renewal in June. We know how NAGA's renewal went, we will see how these renewal negotiations go. I am not hopeful, but anything can happen.
5. Seems reasonable to assume that if the PI contracts are not renewed that any assets that EGT owns in the Poipet and Thansur slot halls will be sold to the associated landholders. That cash will be added to the EGT Cash hoard that Melco now completely controls.
6. After that, the only liquidable assets are the EGMs sitting in the warehouse (and the 670 being leased to NAGA), how they are disposed of - who knows? (Mocha? A used EGM reseller for penies on the dollar?)
7. After that, the cupboard is bare and EGT is essentially a 'concept testing division' of Melco that is developing a Unicorn Social Gaming platform, where Sr Management Online gaming development experience = zero
8. If Social Gaming works, great, if not try something new. EGT has enough cash to fund the Social gaming project for about five years at the current burn rate (assuming zero revenue from Social Gaming project)
9. EGT acts as Melco's 'legal firewall' in case the Social Game violates any foreign laws, etc.
I di not think that EGT will get taken private.
But if there is a buyout offer, then the 'offer' will be voted on by all shareholders, but since MELCO controls over 50% of the voting share , and therefore the BOD, the sale will be approved.
On the day the sale is executed, your shares will automatically be sold at the designated price and all further trade activity will halted. EGT as a separate company will cease to exist.
Your only recourse is a class action lawsuit, but those typically only benefit the lawyers... WHEN and IF they win.
They spent 15 million to get full control of EGT's 35M (in cash). Melco got a 2x ROI on day 1 after the shelf offering. THAT is why Melco bought the EGT shares.
Because Melco now owns more than 50% of the voting stock after Management 's 'shelf offering' last year, EGT is now a "Controlled Company" (see 10K). Essentially EGT is now just a semi-autonomous DIVISION of Melco. Individual shareholders (even if all banded together) have ZERO control over the direction of the company as dictated by the BoD (which Melco now also fully controls). If Melco would have had to buy the same number of shares in the open market , it would have driven the PPS *WAY* up and Melco wanted the shares on the cheap. Now EGT doesn't have to worry about other shareholders or the PPS.
Updated definition of 'Controlled Company' from the SEC:
"On February 10, 2009, Nasdaq filed with the SEC a proposed rule change to Rule 4350(c)(5) to clarify Nasdaq’s definition of a “controlled company.” Nasdaq’s current practice is to deem a company a “controlled company” if more than 50% of the voting power for the election of directors is held by an individual, group or another company. The proposed rule change specifically adds the words “for the election of directors” into the rule itself which currently reads, “[a] Controlled Company is a company of which more than 50% of the voting power is held by an individual, a group or another company.” If a company is deemed a “controlled company,” the company is exempt from the requirement to have a majority of independent directors and independent compensation and nomination committees. The proposed rule change is effective upon filing but subject to a 30-day pre-operative waiting period which Nasdaq has requested that the SEC waive."
"Our social casino gaming business will suffer if we are unable to develop and launch successful games for mobile platforms and successfully monetize those games. Our ability to successfully develop games for mobile platforms and their ability to achieve commercial success will depend on our ability to: "
And then they list 16 landmines...
My top 5 favs...
* compete against monopolistic and IP infringement practices of competing foreign game publishers;
* secure licensing agreements for game content on favorable terms, if at all;
* effectively monetize the games;
* compete successfully against a large and growing number of existing market participants
* minimize launch delays and cost overruns on the development of new games;
Additional 10K NOTE: "We expect total costs, both expensed and capitalized, of approximately $5 million to $6 million for the development and distribution of the platform in the year ended December 31, 2016. The social casino gaming platform is in the early stages of development. "
wonder how much more expensive it will be in "Late Stage" development?
Agreed. Historically they lumped together all venues by country saying that they did not want to disclose earnings from any specific venue...yet they always broke out NAGA because the WUD was high and they wanted to spotlight it as if other venues in Cambodia could match that level of WUD even though NAGA is unique in that it has a protected market and exclusive rights in THE most cosmopolitan, progressive business city in the country). Well that ship has sailed and now we will see how well they have done in competitive markets.
PI WUD averaged 65.00 for the calendar year of 2015
But they better announce a contract renewal for the three remaining PI venues on the 5/12 call because that PI WUD will go to 0.00 after 6/30/2016 if no renewal is signed or they don't get another EGM lease deal from those venues.
"In the Philippines, our gaming operations comprise three venues in the greater Manila area. For these three venues, our share of the net win per unit per day ranges from 15% to 35%. Contracts for our three venues in the Philippines expire on June 30, 2016 and we have commenced renewal discussions with the venue owners or, in the case of one venue, with PAGCOR. "
Given their inability or lack of interest in renewing with NAGA, the chance of a PI renewal does not give me a warm fuzzy feeling.
Looks like they have pushed all of their money to the center of the table on the Unicorn project.
Also per the 10-K Since after the shelf-offering EGT is now technically a "Controlled Company" (a semi-autonomous division of MELCO), don't expect the Unicorn to leave piles of golden dookie behind as it flies by.
Excluding the 22/day flat-rate lease revenue we are getting from NAGA for one quarter (declines to 20/day next quarter), what do you think the average EGM revenue-sharing WUD will be for the remaining two venues in the Cambodian market (Thansur Bokor & Poipet) will be for Q2 without NAGA to skew the results upward?
My guess is 80-88/day. I base that (admittedly) pure SWAG on the daily EGM lease price that NAGA is paying (80.00 x 25% = 20.00).
Disclaimer: My Cambodian WUD guess above may turn out to be overly optimistic. We will find out what the real numbers are in ~ 2 weeks.
Any other guesses? Please include the reasoning behind your guess.
Now that Melco owns more than 50 % of the stock, any offer to take EGT private could get voted through regardless of the premium. A 50% premium would be under 3/share (aka 18.75 cents pre 2x RS). Existing large shareholders are trapped due to pitiful daily volume and ALL investors are weary from the unbroken string of failed new revenue generating initiatives over the past 5 years that were supposed to 'turn EGT around'. Clarence has run out of accounting 'tricks' ( outsourcing EGT departments to Melco (ex: HR & Payroll), selling off Dolphin, etc.) and this new social revenue stream is questionable - but I will reserve final judgment on this Unicorn until I see the details (and costs) of their plan.
The shelf offering gave them voting control w/o having to buy shares in the open market (which would have driven the PPS up due to low daily volume).
Not all of their decisions have been 'smart' ones. We will see in a few weeks what the recurring revenue really is for EGT. More importantly, the CC will also give management a chance to provide some more specifics on costs, goals, target market, expected revenue, and deployment date of the new social gaming division. I hope they take advantage of the opportunity to share their future vision IN DETAIL.
VNX (the predecessor to EGT) bought Dolphin plastics for 5.7 million in July 2006. They moved the plant from Australia to Hong Kong and subsequently divided up and sold off the non-gaming (automotive and Medical) aspects of the company.
GPIC has ALWAYS been the 800 gorilla in that space and EGT did not do a good job of marketing their chip business (or any other hardware aspect of the company, shufflers, etc.) All major sales were all 'in the Ho family' and margins were low. Some sales were notable but not consistent given the limited market (Ho family). Better to get 6M for what is left than let that division whiter away into nothing. Dolphin (under EGT) was one casino ship innovation from becoming obsolete.
So..... Status as of today
* We can't seems to land any new revenue sharing contracts (small or large)
* Dreamland Casinos were a nightmare (one sold at a loss, others performing horribly - which we will see in full view in May when Q2 numbers are released, with not NAGA to mask their performance)
* Although we have paid to reserve the right to build several other Dreamland Casinos in Cambodia, those seem to be on the back-burner or (more likely) completely abandoned.
* We did not renew our NAGA contract (for whatever reason) which was the largest single customer and largest single source of revenue.
* most of the business services an internal departments (Accounting, HR, etc) have been outsourced to parent corp.
So all we have left is....
* A month-to-month lease for
Are we there yet? ...are we there yet?
So far up 2 cents today. At that rate, it will be 1Q2017 before we hit 3 bucks .....and we have not even seen the scary Q2 results that will be coming out in May. Better go out and buy some Big Boy pants and a shovel before that conference call. Expect Year to year 2016/2017 year-to-year comparisons are going to look pretty nasty from 2Q2017 through Q42017...after that it should swing back to more even comparisons and maybe by2Q2017, this new Unicorn project will be making some money to offset the NAGA loss.
Current price is 2.07, so using your language, 2.08 is moving 'towards' 3+ :-)
Why even bother with making PPS predictions when volume is so low and trading is so choppy? EGT has been trading in a +/- 15% trading range centered on 2.00 since August 2014 (with a small handful of temporary spikes). 20%-30% would be a nice ST return if there were enough liquidity to actually 'trade' EGT, but unfortunately there is no interest in this stock at this time. Maybe that will change later.
Using your 'inside connections' to get a better picture of what the new 'social gaming app' looks like, it is is both IOS and Android compatible, and how it would 'pay off' to users would be much more beneficial information than highly improbably PPS SWAG guesstimates. That will hopefully generate enough sustained interest to generate the volume needed to actually TRADE this stock in 1K+ sized blocks.
Closed @ 2.07 today, down 7.87%. You had to know that had to happen because yesterday the PPS jumped up on just a handful of low-volume trades.
Looks like somebody made a couple hundred bucks on a quick turn-around. May have even been the MM trying to show some liquidity for EGT since this little stock is off the RADAR of Wall Street (as is evidenced by trade volume).
Whenever the PPS moves up on sustained daily volume of 10K or more (we are only talking about $20- $30K in trading dollars per day), then you can start to think about EGT 'moving up' to some target number'.
Until then, like it of hate it, it is what it is.
It's OK that we had about 500 shares total traded until 3:52 PM because ....
I just heard the news
Everyone's talking: Life is good!
'Cause everything's awesome
Awesome jobs and new opportunity
More free time for my awesome community
I feel more awesome than an awesome possum
Put my body in chocolate frosting
Three years later I shot the frosting
Smelling like a possum, everything is awesome
Accept to look at new brown shoes
It's awesome to win and it's awesome to lose
Everything is better when we stick together,
Side by side you and I gonna win forever?
Let's party forever
We're the same unlike you, you & me we are workin' in harmony
Everything is Awesome,
Everything is cool when you're part of a team
Everything is Awesome when you're living out a dreams
Everything is Awesome,
Everything is cool when you're part of a team
Everything is Awesome when you're living out a dreams
1. How will EGT extract revenue from their free-to-play games?
2. When is expected breakeven ("We expect total costs, both expensed and capitalized, of approximately $5 million to $6 million for the development and distribution of the platform in the year ended December 31, 2016")
3. What are the ongoing maintenance costs?
4. When is the rollout? ("The social casino gaming platform is in the early stages of development")
5. What will be the incentive for a serious casino gambler to play a non-cash winnings game on his/her mobile platform of choice?
6. Even though the market is currently 'underserved', who are the competitors ALREADY serving the SE Asian market?
Down ~12% today on 1370 shares traded. 3.00 not looking good for end of week.
Maybe end of quarter *IF* new social game has a PR that provides more detail re: HOW the company will extract revenue from new venture, WHERE the revenue will come from (game is free to play), projected usage targets, etc.
Might not see 3.00 by end of year if EGT Management remains silent through May (because we know that they are not typically very communicative to the investment community). Without positive news to prop up PPS, expect EGT to continue to slide when Q2 results are released in May as the Q2 earnings will reflect the stark reality of the new reduced NAGA leasing revenue stream and the performance of the other EGT Cambodian venues will be on full display without Naga to prop them up. And I do not think that they are doing as well as their sister venues in the PI.
If NAGA opts out of their EGM lease after 9/1/2016 (unlikely because it is SO profitable for them as they are now pulling in 225+ per machine, but it remains a possibility), then 3.00 is off the table entirely until either the new 'Social Game' (Code Name: Unicorn) proves itself as a significant revenue generator OR we land another large revenue sharing contract. Last option is that some other casino sees how much $$ they are giving away in revenue sharing and loads up their casino with leased EGMs at fixed price and cleans out our warehouse)
Only 425 shares traded today... Not going to get to 20 dollar heaven on that pitiful trade volume.
SCOTTY...WE... NEED... MORE... POWER!! Unleash the iHub Kraken and engage the impulse (Buyer) drive !!!!
CC. Please re-read 10K Annual Review (slowly) 8-)
additional prizes include:
A ride in the iHub PPS Prediction Balloon. Powered exclusively by hot air (Warning. Ride at your own risk. Flying unicorns may damage balloon and send it crashing to earth.)
EGT Darwin Awards for late-investing bag holders.