Why the science games are skipping this week
Actions of Scientific games (NASDAQ: SGMS) are up 10.7% this week after the leader in gaming and lottery technology made public measures related to the lottery business it plans to divest.
While the decision to divest the SG Lottery business has been known for some time, the metrics published Tuesday by Scientific Games regarding projected revenue growth and Adjusted EBITDA were ahead of analyst expectations.
The gaming tech specialist said segment revenue is expected to grow at a two-year compound annual growth rate of 13.6% through fiscal 2022. Revenue growth based on instant lottery participation is estimated at 14% in the United States and 23% internationally for the year. 2021, while the revenue growth of instant lottery prize per thousand tickets is estimated at 28% internationally for the year. Italy alone will be responsible for 36% of the growth in European turnover that will be recorded.
North America provided around 73% of FY20 revenue, while Europe accounted for 24%. Adjusted EBITDA is expected to increase 31% in fiscal 2021, but slow to 7% in fiscal 2022.
The information was being leaked to potential buyers of the company, and due to the unit’s outperformance, the market apparently believes Scientific Games might be able to get a higher price tag for the company.
Truist Financial Analyst Barry Jonas reiterated his buy recommendation on the entertainment tech stock following the disclosure, telling investors in a note that the SG Lottery division could benefit from a significant rise in its multiple at two figures compared to the valuation of its rival International gaming technology.
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