INLOT.AT - Intralot

[skanjete]

Most of the cash flows (EBITDA) goes to the Intralot shareholders but the accounting earnings may not.  The reported MI in the income statement is based upon accounting earnings allocation not EBITDA.  The MI is quite volatile and depends upon accounting earnings allocated to the MIs and Intralot.  Not enough detail is provided about the profitability of each JV to build up accounting earnings allocation.  Analysts just add the MI at FV to determine the value of the company.  Also if you look at CFO the MI's portion of the cash flow is removed.

 

Packer 

 

Thank you for the answer.

So if I understand it correctly, the economic earnings for the equity holders should be somewhere between the "accounting earnings after MI" and "cash flow minus dividends paid to MI"?

 

Maybe the fact that equity earnings are difficult to quantify is the very reason that the equity could be undervalued by the market.

[racemize]

my notes from phone call:

 

wins in China/Asia could have dramatic impact on future (positive)

 

cap-ex guidance for 2014:

coming from average cap-ex over 5 year of 100m, for investment;

going forward, normalizing with no major cap-ex going forward, will capitalize from existing contracts, should show up in numbers

 

write-offs are normal course of business (either for the current quarter or going forward)

 

may do hedging in 2014 to compensate for FX

 

in final stages of refinancing debt (I think coming due in 2014), 3 year facility

 

race -

Thanks for the notes!  Is this from a call to the company or a conf call?  If latter, can you send a link to details...couldn't find anything on their website.

 

Thank

 

It was a conference call, replay is in this link:

http://www.intralot.com/content/3045/intralot-announces-full-year-2013-financial-results-conference-call-invitation-wednesda

[Kiltacular]

my notes from phone call:

 

wins in China/Asia could have dramatic impact on future (positive)

 

cap-ex guidance for 2014:

coming from average cap-ex over 5 year of 100m, for investment;

going forward, normalizing with no major cap-ex going forward, will capitalize from existing contracts, should show up in numbers

 

write-offs are normal course of business (either for the current quarter or going forward)

 

may do hedging in 2014 to compensate for FX

 

in final stages of refinancing debt (I think coming due in 2014), 3 year facility

 

race -

Thanks for the notes!  Is this from a call to the company or a conf call?  If latter, can you send a link to details...couldn't find anything on their website.

 

Thank

 

It was a conference call, replay is in this link:

http://www.intralot.com/content/3045/intralot-announces-full-year-2013-financial-results-conference-call-invitation-wednesda

 

Thanks!  It is very strange: I still cannot find that press release when I go directly to their site yet your link works fine.  Perhaps I'm in the wrong area of the website.

[racemize]

you have to go to the announcements part.

 

Now, as to how to find the presentations, I have no idea.  The only way I've gotten them is via google, not their site.

[phil_Buffett]

down 15% since the last earnings. dont understand it. i simple buy more Shares  :)

[whistlerbumps]

Re Minority Interest... here is a comment from a recent analyst report. 

 

Finally, we have maintained the

stake of minority interests in group’s net profits at high levels, due to the increased

contribution of the contracts in Turkey, Argentina and Azerbaijan where minority

shareholders hold material equity stakes in these operations. For 2015, we forecast net

profits of EUR 22.2m on the back of better operating profits and lower minority interests.

 

 

Does anyone know the ownership and contribution of EBITDA from these countries?  For companies like this, I often find that it is best to remove the minority owned EBITDA from total EBITDA to give a better picture of common shareholder cash flows as the balance sheet number often understates the true liability. 

[raaandy]

Hi Whistlerbumps, any chance you can share the analyst report?  Thanks in advance.

[racemize]

Link to presentation for Intralot:

https://www.dropbox.com/s/q5h3c3bycbd3mc7/2014-03%20INTRALOT%20English%20Presentation%20FY2013_.pdf

[Kiltacular]

Link to presentation for Intralot:

https://www.dropbox.com/s/q5h3c3bycbd3mc7/2014-03%20INTRALOT%20English%20Presentation%20FY2013_.pdf

 

thanks

[jeremykgold]

Link to presentation for Intralot:

https://www.dropbox.com/s/q5h3c3bycbd3mc7/2014-03%20INTRALOT%20English%20Presentation%20FY2013_.pdf

 

Finding Intralot's presentations is a mystery to me. How did you? In the past I could only find them by googling them but this one doesn't even come up that way!

[racemize]

I emailed IR for it.

[tombgrt]

Their growth in Italy after the market liberalization is impressive. Did they achieve this partly by acquisition? What other markets could see liberalization?

 

Seems that their debt is quite expensive for a company with highly recurring revenues, good growth and modest debt levels. Wouldn't they be able to refinance some here? Might be able to lower interest expenses by a few million annually.

[yadayada]

I just wonder, what % of net cash will come from intangible assets and what will come from tangible assets? Seems to me that investing activities in tangible assets will be roughly the same or maybe a bit lower over time on average over time? That number is roughly 50 million.

 

There was also 22 million lost in exchange rates, wtf? Wonder what the average is here?

 

Oh and when it comes to minority interest, you can see that in a increase in receivables over the years right? That would be another way of looking at that. That increased on average like 60 million a year or so over the past 7 years.

 

So if you take 81 million in net cash, add 20 million from currency exchange (22 seems too high, 2 is better?) and about 7 million of receivables, and then substract the 43 million of payables i get about 65 million of net cash?

 

depreciation of tangible assets is 50 million. If you make that 40 million and only 5 million for intangibles (which is 40 million in amortization) going forward.

 

so 65- 45 = 20 million in FCF.

 

Seems like true earnings after those minority interests is in their receivables. it was on average -54 million in the last 10 years or so. And -60 in the last 7. If that number will be only 30 million then i would get 50 million in FCF, which would make it cheap.

 

And there is some leverage in their online assets, but looking up alot of those, it didnt look that promising to me. ALso having played poker, I dont see how they will capture anything of the online poker market. Competing existing sites will have a huge moat there.

 

I also dont see how you get only 25 million in total investing activities going forward? If you stick a 10x multiple on it, it will have to go up in the future right? Especially for their tangible assets, which accounts for over half of amort&depreciation?  Might be low next year, but you have to account for that in year 5 or 6.

 

 

One huge problem i have with this one, is that they took on some expensive debt to basicly pay dividends. over 300 million with 9.8%?? WTF?? Why not just go in growth mode and only pay small dividends or no dividends? That just seems like bad management.

 

 

[redcorolla95]

Hi Packer, using yr 5 Jan post and updating for their latest financials for 2013.

I have

EBITDA                        195

Taxes                            35

Maintenance capex      31 (2% of gross revenues)

Net interest expense    33

Minority interest            17

FCF                                79

 

I was wondering if you deduct the change in working capital of 28m.  This brings the FCF to 51m.

Latest receivable days is 53 (average was 61 since 2007) - should we expect this to drop sharply as capex normalizes to maintenance levels?

 

[Packer16]

If you look at the presentation posted by racemize above (including changes in WC) is closer to Euro 109 million.  As to normalized changes in working capital if look at the historical levels and that of Intralot's comps (Gtech and SGMS) that will provide some insight if the 2003 level is normal.

 

Packer

[argonaut]

It's nice to see the interest rate come down significantly on this new round of financing:  http://washpost.bloomberg.com/Story?docId=1376-N4UF6J6JIJUU01-40MQIENOR4JCBFV5VTBVTSLN96

 

But still amazing to see the risk premium because of the country they are located in.

[racemize]

Q1 results are out:

 

http://www.intralot.com/sites/default/files/INTRALOT%20(Fin%20%20Stat%20%20-%20Full%20Notes).pdf

 

Big revenue increase, and not much changes in earnings.  I wish some of that had come to the bottom line.

[plato1976]

Yes it's quite bothering

 

Q1 results are out:

 

http://www.intralot.com/sites/default/files/INTRALOT%20(Fin%20%20Stat%20%20-%20Full%20Notes).pdf

 

Big revenue increase, and not much changes in earnings.  I wish some of that had come to the bottom line.

[cameronfen]

I've just started looking at Intralot and I haven't read this entire thread yet so I don't know if this was covered.  Apparently Intralot's Gross Margins are only 15%, compared to historically around 40% when they were doing well.  GTEK and SGMS also have margins between 40-50%.  Does anyone know why margins collapsed and if they will return?  I attached the Capital IQ finacial statements for Intralot, GTEK and SGMS.  You can use it for anything but you can compare margins in the ratio tab. 

Intralot_SA_ATSE_INLOT_Financials.xls

GTECH_S_p_A_BIT_GTK_Financials.xls

Scientific_Games_Corporation_NasdaqGS_SGMS_Financials.xls

[Packer16]

The reason is that a good part of Intralot's revenue is gross (before payout) (due to actually running lotteries) versus most of the other players using net revenue (after payout).  This is shown in one of there old presentations.  If you adjusted the 2012 EBITDA margins to a net basis it would have increased from 12.9% to 34.3%.  You have the same issue with OPAP, the Greek Lottery operator.

 

Packer

[zizou]

love reading these forums; i'm a newbie and have perused this thread on INLOT

 

so I'm very interested in this name, just want to get comfortable with the downside risks and get a better understanding of reasons for the current mispricing; would greatly appreciate it if some experienced investors can please help weigh in on (ie. contradict) my attempt below or add to the list ...

 

mispricing may most likely be related to:

1. risk premiums on account of being a greek domiciled co. (feel comfortable that the majority of their revenues are from outside greece)

2. some concerns about leverage (feel comfortable that debt is trading above par for now and ebitda/interest ~3.3 and EBITDA-Capex/Interest is ~ 2.3)

3. company may not screen well based on reported net income...  (feel comfortable that the cash flow/equity yield is high ie. >20%)

4. Management incentives vs return of capital to shareholders? Why no dividends?

5. ?

6. ?

 

Downside risks may include:

1. Greece growth falters and fiscal situation worsens..? (Europe economy is expanding and ecb is dovish)

2. Levered capital structure? Interest burden starts to become worrisome? (debt is trading above par and can possibly be refi cheaper)

3. Dishonest management?

4. New entrants/competitive rivals?

5. ?

6. ?

 

Cheers!

zizou

[investor-man]

Thought I'd bump this thread. This stock has been the most volatile stock I've owned this year. If you were thinking about getting in, now would be a good time. It has been bouncing around between 1.9 euro and 2.2 euro for the last 6 months or so. It's at 1.92 today.

[tombgrt]

Does anyone know when intralot is reporting? Hasn't exactly been a hot sector lately!

[investor-man]

Bloomberg says August 29th

[tombgrt]

Bloomberg says August 29th

 

Thanks.

 

The easiest way to deal with MI's is to add them in as debt in your EV calculation.  This still results in an EV/EBITDA of 4.3x with GTECH and SGMS @ 6.1x and 6.4x EBITDA respectively.  They also seem to be gaining new business in Ireland and Wyoming.  A really cheap equity that is growing.  Sounds good to me.

 

Packer

 

Hi packer,

 

Do you adjust your valuation downwards now that GTECH and SGMS are basically trading at a much lower multiple? You mentioned 9x EBITDA for INLOT before. That seems a lot but I assume you are being generous because of the growth rate. Are you starting to consider those as attractive as well?