Is Global Gaming Technology (IGT) a Long-Term Smart Buy?
Mittleman Brothers recently published its letter to investors for the third quarter of 2020, of which you can Download here. The Mittleman Global Value Equity Fund – Class P fell 1.4% net of fees (AUD) in the third quarter of 2020, compared to a 3.9% gain for the MSCI ACW index. You should check out the Top 5 Mittleman Brothers Stock Picks for Investors to Buy Right Now, which could be the biggest winners this year.
In said letter, Mittleman Brothers pointed out some actions and International Game Technology (NYSE:IGT) is one of them. International Gaming Technology (NYSE:IGT) designs and manufactures computerized casino gaming systems. Since the start of the year, International Game Technology (NYSE:IGT) the stock fell 20.4% and on November 17 it had a closing price of $ 11.91. Here’s what Mittleman Brothers said:
“International Game Technology (IGT), which rose 25% when reopening in optimism, was the second best performer in the third quarter. Frustratingly, he just lost all those gains at the end of October on the resurgence of COVID-19 cases and the renewal of lockdowns in Italy (which represent 35% of its sales). IGT manufactures slots, casino management systems, games and lottery systems (78% market share in US lotteries) and (increasingly) sports betting. Under normal conditions, and once COVID-19 has subsided, these activities generate substantial and largely recurring free cash flow, much of which was paid out as dividends before the pandemic.
MIM believes a full recovery will occur much faster than analyst consensus expectations which imply a very low multiple of EBITDA and FCF for such a high-margin, stable and growing group of companies. The pessimism due to IGT’s exposure to Italy is greatly exaggerated given current valuations. At least some analysts recognize the prospect of a much higher valuation for IGT, with “bullish case” views of fair value between the middle and the top $ 20 (MIM’s target is $ 29, or more. triple the current price of $ 8.68). MIM’s $ 29 price target involves 9x EBITDA and 15x FCF of $ 400M.
On September 14, 2020, an Australian hedge fund, Caledonia, paid a 47% premium over the market price of $ 19 to purchase Ron Perelman’s controlling stake in Scientific Games (SGMS). SGMS recovered further in the mid-1930s after the news, as brokerage firms rushed to raise their price targets. Scientific Games is IGT’s main competitor in lotteries, slots and sports betting. IGT also has a large majority shareholder in the late 1970s, Italian Marco Drago of private equity firm Agostini Spa, which owns around 50% of IGT. Caledonia appears to have paid 9.4 times EBITDA to $ 28 for Perelman’s 35% stake in SGMS ($ 928 million to Perelman). “
In Q2 2020, the number of bull hedge fund positions on International Game Technology (NYSE:IGT) the stock decreased by approximately 8% compared to the previous quarter (see the table here), so a number of other hedge fund managers do not believe in IGT’s growth potential. Our calculations showed that International Game Technology (NYSE:IGT) is not classified among the 30 most popular stocks among hedge funds.
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Disclosure: none. This article was originally published on Monkey initiate.