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Bally Technologies (BYI)

This gaming company has been buying back its shares at an increased pace, and it won 80 innovation awards in 2013, due to its focus on research and development.

Bally Technologies (BYI)
from Cabot Benjamin Graham Value Investor


Bally Technologies (BYI) is a gambling equipment manufacturer based in Las Vegas and founded in...

This gaming company has been buying back its shares at an increased pace, and it won 80 innovation awards in 2013, due to its focus on research and development.

Bally Technologies (BYI)

from Cabot Benjamin Graham Value Investor

Bally Technologies (BYI) is a gambling equipment manufacturer based in Las Vegas and founded in 1968. Bally engages in the design, manufacture, operation and distribution of gaming devices and systems. The company also offers software applications to gaming operators providing them with marketing solutions, data management and analysis, accounting and player tracking programs, and security.

In November 2013, Bally bought fellow gambling equipment maker SHFL Entertainment, also based in Las Vegas, for $1.3 billion in cash. SHFL, known for its automatic card shufflers, makes a variety of casino equipment along with proprietary table, electronic table and online games. The integration of SHFL is already exceeding expectations.

Sales will surge 21% and EPS will rise 17% during the 12 months ending 12/31/14. Replacing old machines with new ones has slowed, but continuing market share gains and new products will boost sales and earnings.

The expansion of gaming in Illinois, Kansas, Maryland, Ohio, Iowa and elsewhere will provide improved revenue growth during the next several years. Expansion into higher growth international markets will also bolster Bally’s results. Sales and EPS will likely increase another 12% and 18%, respectively, in 2015.

Bally does not pay a dividend, and debt is a tad high, but at 17.6 times my calendar 2013 EPS estimate of 3.85, shares are reasonably priced. Expected EPS growth during the next five years is 17.8%. Buy at the current price and hold until BYI climbs to $88.95.

J. Royden Ward, Cabot Benjamin Graham Value Investor, www.cabot.net, 978-745-5532, February 13, 2014