Scientific Games Corporation (SGMS) has won a 10-year contract from the Olifeja UAB, the Lithuanian national lottery operator, to supply instant tickets and cooperative services. The contract could be extended for another year.
The contract begins from June 2010. Scientific Games will be the supplier of instant tickets, including ticket and game design, and will also provide consulting services to the Lithuanian lottery operator, such as marketing support and training and production-related matters.
Based in New York City, Scientific Games is a global IT systems and services company that provides instant ticket and online lottery products, systems and services to lottery authorities and gaming markets worldwide.
Scientific Games has expanded through international development activities, especially in France, Italy, Germany and China. In Germany, the company runs 20 active ‘Deal or No Deal’ games and instant ticketing with 6,000 retailers.
The agreement with Olifeja validates the company’s concerted focus on international expansion. Olifeja UAB currently operates the Lithuanian National Lottery. To diversify its lottery business in Northern Europe, we view the deal with Olifeja in Lithuania to be extremely beneficial for Scientific Games.
Currently, instant ticket sales in Lithuania represent less than 10% of total lottery sales. Total Lithuanian lottery sales in 2009 were $42.0 million, of which $3.3 million were generated by the sale of instant tickets. We believe that Scientific Games is well positioned to benefit from growth in instant ticket sales worldwide.
Scientific Games benefits from its strong and growing presence in the worldwide instant ticket and online lottery markets, and has also made significant in-roads into international markets. The Lithuania deal will ensure better sales prospects for Scientific Games’ lottery business.
Scientific Games reported dismal fourth quarter 2009 results (most recent quarter) with a loss for the quarter versus analysts’ expectations of a profit. Numbers were primarily hurt by lower instant ticket and service revenues, which caused shares to slide after the company released its results.
Moreover, Scientific Games is dependent on the renewal of long-term contracts, which could lead to loss of revenues if major contracts are not renewed or are lost to competitors.
Therefore, we have a Neutral rating on the stock.
Read the full analyst report on “SGMS”
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