Going forward, all of the aforementioned companies will benefit on any loosening of U.S. online gambling laws, but Shuffle Entertainment has the added leverage of its potential European operations. Bally Technologies has no European exposure, with international operations limited to Canada and an intriguing pilot plan for South Africa. Bally Technologies is looking for some hardware and software revenue from its international division for every quarter over the next 2 years, but beyond that it couldn’t offer more.
International Game Technology did have a European online poker network, until it closed. The company offered no specifics on European performance, but presumably their outlook for the region was poor so the poker network was shut down.
WMS Industries rolled out a U.K.-based real money platform, jackpotparty.com, in addition to B2B online casino managed services. The latter was rolled out in collaboration with Groupe Partouche in Belgium. The go live for the B2B services is expected in January 2013, and will involve a revenue share with Groupe Partouche. There is additional iGaming product line offered (for Europe) with their Jadestone subsidiary. The July release of Jackpot Party generated an average of $55 K in net daily revenue, off 500 K active users ($0.11 net revenue per active user / day). These figures are ahead of competitors in the space, offering reason for optimism in Shuffle Entertainment’s European plans. WMS Industries consider this equivalent to revenues from 850 gaming machines in a land-based operation at favourable margins. It also sees this rising for the next quarter.
There are a couple of items that separate the aforementioned from Shuffle Entertainment. Shuffle Entertainment carries very little debt, just $1.3 million (a debt equity of 0.5). Bally Technologies carries over $0.5 billion in debt with a debt:equity ratio of 246, and International Game Technology isn’t much better at $1.8 billion and debt:equity of 142. WMS Industries carries a more modest debt, but it’s still higher than Shuffle Entertainment. Shuffle Entertainment’s profit margin of 14.9% is slightly ahead of its peers, with WMS Industries weakest at 8.4%.
International Game Technology in the only stock to pay a dividend. Although the yield is small, it did recently increase the payment from $0.06 to $0.07 per quarter.
Finally, WMS Industries is supposed to be acquired by Scientific Games, so if you like the WMS Industries story, check out Scientific Games (assuming the deal goes through!).
Outlook
The next swing lower in the broader market (e.g. around a 10% drop in the S&P) may be the time to start looking at Shuffle Entertainment. However, a push to new multi-year highs will make it more resilient to any drop in the S&P. And such push would likely be delivered on the passage of a New Jersey gambling act. Those fearing missing out may want to take a look at Shuffle Entertainment now.
The article A Jackpot Stock For Your Portfolio originally appeared on Fool.com and is written by Declan Fallon.
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