a rough q4 makes gaming partners international a bit more interesting
International Game Partners (NASDAQ:GPIC) While I\'m not sure if anyone noticed the situation in the fourth quarter. The maker of gaming chips, playing cards and other casino products decided after the third quarter not to worry about revenue release. In the past three months, the volume has averaged only about $40,000 per day, and the bid/bid spread I wrote this article was over $1 ( Admittedly, a quiet day in the market). The good news for GPIC is that these issues seem to be basically a problem --time - Main and betterthan- Expected demand for playing cards business. At the same time, GPIC has fallen back after a sharp early recession -- One seems to have nothing to do with the report (the 10- K not released until March 24). GPIC provides credit for the disruption in the fourth quarter, but still looks quite cheap -- There is a clear acquirer that makes sense even at a modest premium at the current level. The bad news is that GPIC still lacks liquidity, is still controlled by major shareholders and still has no interest in selling. The current issues are enough to stop the GPIC\'s bullish case from becoming so compelling. However, a slight decline in prices or an improvement in performance in 2017 may change this situation, making the GPIC not only not sufficiently concerned, but also undervalued. Disruption in the fourth quarter and decent 2016gpic figures in the fourth quarter were hit hard by huge profit pressures. Revenue has indeed fallen by about 1. 5%. But the gross margin fell by 30% as profit margins fell to 28. 2% from 40. 1% years ago. The pressure seems to come mainly from the operation of the company\'s poker maker in Missouri. Per the 10- K, the capacity of the facility has exceeded 100%; The game partners then had to expand the factory and upgrade some of the manufacturing processes that were not specified. This combination reduces efficiency, increases costs, results in a fourth-quarter profit compression and may have a sustained impact of 2017. Obviously, this is not good news. But it\'s not a terrible news either. In 2016, sales of playing cards increased by more than 10%, accounting for about 30% of total income, which is a reasonable driving force for forward development. Gemaco\'s 2014 acquisition has established a product line ( This accounted for only 11% of total sales in 2013, the year before the purchase) The recent success means that the acquisition has contributed a lot. The Missouri plant should return to normal at some point, allowing profit margins to rebound quickly. Missouri aside, 2016 seems pretty strong. EBIT recovered sales revenue at the end of 2015, recovering $400,000 in goodwill impairment in 2016, but down about 7% year on year. Suppose Missouri spent $2 million in the fourth quarter ( This still shows that the profit margin will be reduced to 350 basis points) EBIT is about $10 million, up 16% year on year. SG&A - Again, adjust noncash expenses - Revenue grew by 5% year on year. However, there are also some income problems. Dolphin orders began shipping in the fourth quarter. Although the company has not released its contribution, it appears that the business is operating at a rate of $13 million under EGT ownership. Despite its contribution, the fact that income has fallen is not necessarily gratifying. That said, a major RFID chip order appeared in the third quarter, which made the fourth quarter a difficult comparison in this category. Game Partners achieve some success every year, especially in the long term. Targeted RFID space RFID chip revenue increased by 25% this year ( Probably with the help of Dolphins) Sales of RFID solutions increased by 37% year on year. Table layout and accessories are weak, which may be due to a fairly low level of openness worldwide this year -- Game partners don\'t seem to have major carriers like Las Vegas Sands (NYSE:LVS) Wynn Resort (NASDAQ:WYNN) There are vacancies in Macau this year. But in addition to the production disruption in the fourth quarter, GPIC\'s 2016 production is enough to give us a fairly optimistic view of the future. Asia- Revenue in the Pacific region is flat, accounting for about 26% of total sales; There should be some drivers in the area over the next few years, from the additional opening of Macau to the expansion of sea cucumber vladi (Russia) The Philippines, Vietnam, South Korea and Japan eventually. S. Revenue growth of 5%, small EMEA business growth of 23%. Incentive pay has fallen by $700 and could be reversed next year, but there is still room for GPIC to take advantage of lowto-mid single- The number of organic growth. Adding in Dolphins should have a double effect It is reported that the company\'s profit growth is strong, and the margin expansion of GPIC may be very low. GPIC\'s bull market is still relatively the same in the fourth quarter, even on production issues. ( The market may not pay enough attention to support the situation in the short term. Purchase opportunities. \") EPS on 2016, retreat ~ $0. 03 after- The tax impact of goodwill impairment charges is $0. 67. I think an optimistic case could support Dolphin\'s $100 million revenue in 2017; It may be a bit too far, but the goal for dolphins should be around $95 million. Operating profit margin within 10% ( A year-on-year increase of 30 basis points, due to the rebound in gross profit margin in the second half of the year, SG & A moderate deleveraging) At a rate of 31%, earnings per share were $0. About 80, P/E to 12-13x range. EBITDA is about $13. $14 million, suggesting that there are currently 6x multiples. Capital expenditure was $7. $5 million this year, while D & A is likely to be $4 million, this figure has risen as A result of further spending in Missouri; Standardized maintenance spending seems to be closer to the D & A figures. Basically, 2017 means that the price of the game partner is zero growth. Although there should be an additional gross profit margin improvement in 2018. GPIC has a fairly solid market share ( It is one of the three major suppliers of the card in one currency) A long time left. Long term space for casino expansion and recurring revenue. Here is a clear ending: sell the company to the science game company (NASDAQ:SGMS). SciGames\' roll- Up is based on \"one- Casino operators stop shopping. It can pair the playing card business with its shuffle host, add GPIC\'s desktop accessories and layout to its branded games, such as three poker, and link RFID to the game system unit. SciGames can cut cash by almost $10 million fairly quickly, and there is also a revenue synergy, and for SciGames, the 8x EBITDA multiple may increase. There is a very simple case for SGMS to pay $14 In the agreement reached between the two sides, the price of the game partner is $15. Of course, no one else has a lot of meaning at this point (Aiwei Holdings (NYSE:EVRI) Regulatory issues at least currently)- This limits the ability of GPIC to negotiate. Game Partners are also not interested in selling, and 51% of controls limit the investment of any activist or shareholder in this regard. In fact, GPIC is at 10- It is considering additional acquisitions. If GPIC is able to add value-added services to the current structure at little or no incremental cost, this is not a terrible thing. But this is clearly a more risky strategy, and the illiquidity of stocks makes it more difficult for shareholders to withdraw if there is a clear wrong turn in the strategy. The margin rally is not guaranteed, and given that there are quite a few vacancies in the US, GPIC may face some pressure this yearS. In particular. Anyway, I like GPIC. But I don\'t like it, and I don\'t think the rise is enough to take some trading risks. But I think it\'s an interesting game. One more is the watch list. If profit margins rebound in the second quarter, valuations in 2017 will be much stronger. In particular, if the game partners can continue to drive the growth of RFID, this may make the acquirer more interested ( This is still a huge opportunity to grow if it is primarily assumed). Overall, there may be room for an increase in $10 if GPIC is executed. If investors are flexible enough to see this execution, then there should be time to enter the stock at an attractive entry point. Disclosure: I/we have no positions in any of the stocks mentioned and no plans to start any positions in the next 72 hours. This article was written by myself and expressed my views. I received no compensation ( In addition to Seeking Alpha). I have no business relationship with any stock company mentioned in this article. Editor\'s note: This article covers one or more microcap stocks. Please note the risks associated with these stocks.