Scientific Games Corporation: NASDAQ: SGMS--$4.85: rating: buy. (Jefferies).

Publication: Buyside

Publication Date: 01-APR-03

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COPYRIGHT 2003 Adams Business Media

Gaming & Leisure

Update--March 6, 2003

Buy Rated Scientific Games: Strong Growth Potential to be Realized

Company Description:

Scientific Games Corporation is the leading integrated supplier of instant tickets, systems and services to lotteries, and the leading supplier of wagering systems and services to pari-mutuel operators. It is also a licensed pari-mutuel gaming operator in Connecticut and the Netherlands and is a leading supplier of prepaid phone cards to telephone companies.

Investment Thesis:

We are maintaining our Buy rating and price target of $11 on shares of Scientific Games. The company had a strong 4Q02, and we believe the company has much potential for future growth. We are increasing our 2003 EPS estimates to $0.56 per share from $0.50 per share. The company is maintaining its 2003 EBITDA guidance of between $140 million and $155 million, while we are forecasting $148 million. We are introducing a 2004 forecast of $0.49 per share and cash flow of $138 million, which appears lower than 2003 because 2003 included the one-time installation of 8,000 machines in Ontario. It should be noted these are very conservative estimates, as neither our estimates nor the company's estimates include the possibility of winning any contracts, converting any additional instant-ticket contracts to cooperative services, getting any new equipment orders for 2004 (which the company indicated it is...

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