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Scientific Games (SGMS) to Buy Tech Art, Expand Table Games

Zacks

Scientific Games Inc. SGMS announced that it has reached an agreement to acquire Las Vegas-based Tech Art, a global supplier of blackjack hole-card readers, for an undisclosed amount. The company expects to complete the deal by the first quarter of 2018.

Reportedly, the acquisition will help Scientific Games expand its gaming portfolio by adding Tech Art’s table games namely Super Fun 21 and Bet the Bust.

Further, Scientific Games will be able to deepen its foothold in the international market withTech Art’s MAXTime 4H, a combination of “blackjack hole-card reader and a chip tray” by providing casinos all over the world with increased speed and security for blackjack games.

Per market research firm Technavio, the global board games market is expected to witness CAGR of more than 29% over the 2017-2021 time period.


We believe adding innovative games will help to sustain the momentum in Scientific Games’ shares, which have gained 234.7% year to date, substantially outperforming the industry’s19.3% rally.

Growing Gaming Segment

In the last reported quarter, almost 60% of the company’s total revenue was contributed by its gaming segment, which was driven by higher Gaming Machine, Gaming Systems and Table Products sales.

The company’s Table Products, which grew 15.2% in the last quarter, benefited from growth in leased shufflers, proprietary table games, and progressives.

Further, we note that Scientific Games is benefiting from its acquisition strategies and innovative product lines. Strategic acquisitions have been a key growth factor for Scientific Games over the years.

Last week, the company announced that it has reached an agreement to acquire Canada-based NYX Gaming Group Ltd. ("NYX") for about $632 million.

In July this year, the company announced the acquisition of Bristol, UK-based Red7Mobile Ltd., a firm that designs, develops and delivers innovative and award-winning mobile and desktop casino games and sports apps for real-money gaming partners. The acquisition provided Scientific Games with access to a large portfolio of mobile and interactive game titles, including slot games, instant win/scratch cards, and table games.

The company’s buyout of DEQ Systems in January also contributed to its last quarter results. With the acquisition, the company stands to benefit from DEQ's EZ Baccarat, which has about 800 table games in 150 casinos globally.

We believe the company will continue to pursue strategic acquisitions, which will boost its top line amid stiff competition.

Zacks Rank & Stocks to Consider

Currently, Scientific Games carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Applied Materials AMAT, Micron Technology MU and ON Semiconductor ON, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Applied Materials, Micron Technology and ON Semiconductor is currently projected to be 17.1%, 10% and 18.1%, respectively.

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