PlayAGS Has The Blueprint For Success, Deutsche Bank Says In Bullish Initiation

Gaming supplier PlayAGS Inc AGS offered its shares to the public in a Jan. 26 IPO.

The Analyst

Following the IPO quiet period expiry, Deutsche Bank analyst Carlo Santarelli initiated coverage of PlayAGS with a Buy rating and $23 price target.

The Thesis

The 2018 PlayAGS story is similar to Multimedia Games Holding Company Inc MGAM in 2010, with the similarities being vast ship-share potential, an early stage product cycle and several jurisdictional rollout opportunities, Santarelli said in a Tuesday note.

Santarelli outlined what he views as the favorable aspects of the PlayAGS story:

• Significant white space opportunity in the North American EGM market.
• Strong game performance relative to house averages, driving incremental ship share.
• Strong hardware pipeline with a solid order backlog.
• International growth.
• The participation base, which could drive incremental operating leverage.

"In AGS, we see an upstart equipment supplier, with a steady cash flow generating install base, several growth avenues, both domestic and international, and multiple fundamental tailwinds, which should promote a multiyear double-digit EBITDA CAGR," Santarelli said. 

Deutsche Bank's bullish stance is premised on a healthy opportunity set, a better balance sheet than peers and "dream the dream" potential, the analyst said. 

The Price Action

PlayAGS stock closed its debut session at $18.50, up 15.6 percent from the offer price of $16. Since then, the stock has added 7.8 percent.

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