division The Global Draw ltd. recently extended its partnership
with U.K based bookmaker The Gala Coral Group. Under the terms of
the agreement, Global Draw will continue to be the exclusive
provider of server-based gaming terminals for the Coral Group
The Global Draw and Coral Group relationship dates back to 1997.
Coral Group was the first licensed betting chain to implement
Global Draw's gaming terminals way back in 1999. As per the
extended partnership, Global Draw will launch its new Infinity 2
gaming terminals in approximately 1,744 coral shops going
Scientific Games continues to bear the brunt of a sluggish
domestic market due to lower play levels and higher unemployment
rate. To combat this scenario, the company is looking to expand its
reach beyond the U.S. In this respect, U.K. is an important growth
market for the company, in our view.
We believe that the extended partnership with the Coral Group
will boost Scientific Games' penetration in the United Kingdom and
drive top-line growth over the long term. Moreover, improving reach
in the U.K. market will help Scientific Games to explore other
European markets for server-based gaming opportunities going
We believe that the company's diversified product offerings,
international development activities, recurring revenue business
model and strong growth from the Internet-based business will drive
the stock over the long term. Further, privatization and
outsourcing of state lottery management is a major growth
opportunity for Scientific Games going forward.
Moreover, this will provide Scientific Games a significant
competitive edge over rivals such as GTECH,
International Game Technology (
Bally Technologies (
and Lottomatica going forward.
However, we believe that the visibility regarding this
privatization process remains murky, thereby adding significant
uncertainty to the stock. Further, sluggish macro-economic
condition in the international markets, particularly in Italy and
China is the primary headwind for Scientific Games going forward in
our view. Increasing investments for product development is also
expected to hurt profitability in the near term.
Thus, we prefer to remain on the sidelines. We maintain our
Underperform recommendation on Scientific Games over the long term
(6-12 months). Currently, Scientific Games has a Zacks #5 Rank,
which implies a short-term Strong Sell rating.
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