AGI - Ainsworth Game Technology

[galumay]

Interesting market response to a company reporting revenue, NPAT, EPS and DPS increases of 20%, a share price decrease of 10%.

I had a look at AGI a while ago, but I couldnt see the value. When I run my ruler over them now I still only get an IV of under $3.50 so while the results were certainly healthy, I think the price had run way ahead of value some time ago.

If they get down towards $3 I may be tempted to have another look.

 

[VSntchr]

I think its been a little hard done by. IMO the SP had been factoring in a guidance miss for some time - given the lack of guidance update that shareholders in AGI are used to.

I dont follow AGI closely but I have got it in my pile of reports to go through. Thought it might rebound this morning but the selling persists!

 

[RottenValue]

To put it in context, we have had 4 million shares change hands over the past two days which is about 1.25% of the total outstanding.

I would assume that we have one or more institutional holders lightening their load so to speak. Maybe those that had overstated their estimates?

 

[skc]

To put it in context, we have had 4 million shares change hands over the past two days which is about 1.25% of the total outstanding.

I would assume that we have one or more institutional holders lightening their load so to speak. Maybe those that had overstated their estimates?

May be the market doesn't like this...

The Sydney-based company is building up its portfolio of pokies based on licensed titles and will unveil two new machines at a big trade show in September: Sound of Music and Showgirls.

Read more: http://www.smh.com.au/business/ains...the-pokies-20140826-108nm7.html#ixzz3BZ6O0B7b

I hope it comes with all the favourite songs from the movie.

- The hills are alive... with the sound of Pokies.
- How do you solve a problem like gambling?
- So long, farewell, I kiss my dosh goodbye.

To win the jackpot, you have to line up all your favourite things... it's an awesome product I can feel it alreay.

 

[VSntchr]

I hope it comes with all the favourite songs from the movie.

- The hills are alive... with the sound of Pokies.
- How do you solve a problem like gambling?
- So long, farewell, I kiss my dosh goodbye.

To win the jackpot, you have to line up all your favourite things... it's an awesome product I can feel it alreay.

Needed a good laugh this afternoon, its been a tiring reporting season......(cue the jokes about being soft)

 

[Julia]

There's an interview with the CEO in the current issue of AFR Smart Investor if anyone is interested.

 

[sharls]

Len has stated that both he and his wife will sell down there stakes when the share price is at a level they feel is acceptable to them. This is being done to improve liquidity in the stock. He obviously doesn't need the coin.

I don't recall the exact date however when the S1 after hour crossings went though in the first tranche sold by him and associated parties it went though at $3.80. 19 Million worth. I would consider that a vote of confidence on the part of the buyers.

To answer your question, taking a breather IMHO

Hello there Hosh.

Interesting times with this AGI aren't they?

In regards to Ainsworth himself selling, an interesting excerpt from an article by Roger Montgomery, A Dog's Breakfast (can be googled) from Warren Buffett:
"that relates to the periodic tendency of stock markets to experience excesses which cause businesses - when changing hands in small pieces through stock exchanges - to sell at prices significantly above privately-determined negotiated values. At such times, holdings may be liquidated at better prices than if the whole business were owned - and, due to the impersonal nature of securities markets, no moral stigma need be attached to dealing with such unwitting buyers."

If this very wise assertion from Warren Buffett is exercised in this case, then I am of the feeling/opinion maybe, that, with him selling down his massive holdings, I guess he wouldn't really gives a rats about who he is selling to, would he? Simply asking, no claiming. He, perhaps may think of those as chumps. And of course, having some favourable advisors/commentators in the media to talk up the stock at a good buy at a price of $3.80'ish or whatever would assist - said in general as an amateur observation and opinion.

 

[hosh]

I posted that some time ago Sharls. He did sell down a few mill from memory and It was close to the price at that time. It wasn't at a premium though. What I do remember was the SP ran pretty hard before hand so that might be a good indicator if he intends to sell down again. I think it's a matter of IF not WHEN. He can't go forever. A few punters think he's the be all and end all of this company. IMHO that's no longer the case. The people they are employing worlwide have as much knowledge and contacts in the game as he does. I think AGI will do just fine without Len.

ALL is a case in point. It didn't go down the gurgler after he left. He will be missed however.

 

[VSntchr]

I could be wrong, but I thought that Len's selling was a result of the company share plan? Therefore not him selling stock to receive cash?

As for the influence on the company, I know that Aristocrat still respects him greatly. About 8 months ago I had a contact working for them and she often told me how much influence they still take from Ainsworth.

 

[hosh]

It was a special crossing by him and his related entities. I really can't remember the dates however the S1's went through at $3.80. I know that part is accurate. The reason was to improve liquidity. He certainly doesn't need the money

The share plan he setup is to reward employees for the company's growth From memory he made around 5.5 mill available at a excise price of 22.5c. It's all pretty vague to me now however I was watching the screen closely on the day the S1's went through after hours. It was trading (from memory) slightly above the $3.80 I took a look at the previous post I Think I meant $19mill worth of stock

Funny with all the drama going on over at HC the $3.80 S1 crossing price might have been where Rodger M got his good buy figure from. Maybe he was thinking the punters that purchased them at that price would be reluctant to let them go any cheaper. He might have thought it added a certain amount of support at that level

Just a theory.

I reckon your spot on with ALL watching Ainsworth closely, after all he did start that company and probably knows what they're up to before they do.

 

[hosh]

Here's the transaction

15 March 2013

ASX Release

ASX Code: AGI


Ainsworth Game Technology Limited - Share Transactions

Ainsworth Game Technology Limited (AGT) today announced that a sell down of 5.5 million shares in
AGT to a range of institutional investors was conducted after market on 14 March 2013.

The share transactions were effected in part through the sale of approximately 2.0 million ordinary
shares by interests associated with Mr LH Ainsworth as part of a sell down foreshadowed by Mr LH
Ainsworth at the Company’s Annual General Meeting held on 21 November 2012.

Mr LH Ainsworth stated “I continue to be confident about the Company’s prospects and this sell down
is to further assist the Company and provide liquidity in currently traded shares.”

In addition, 1.5 million ordinary shares were sold down by interests associated with Mrs MC
Ainsworth.

The remaining shares transacted (approximately 2.0 million ordinary shares) were sold by AGT
employees, including the Company’s CEO Mr D Gladstone, with Australian employees selling shares
granted to them under a long term incentive plan established over a portion of Mr LH Ainsworth’s
personal shareholding and US employees selling shares issued to them under a long term incentive
plan established by AGT.

 

[VSntchr]

Thanks Hosh, nice work.

I didn't read the thread thoroughly enough and thought you guys were referring to the more recent selling.
Yep, I remember now when he was selling.
There was also the matter of some loans to the company wasn't there? I remember some people were of the opinion that once he had them repaid he was gone - that didn't prove to be the case.

 

[hosh]

Thanks Hosh, nice work.

I didn't read the thread thoroughly enough and thought you guys were referring to the more recent selling.
Yep, I remember now when he was selling.
There was also the matter of some loans to the company wasn't there? I remember some people were of the opinion that once he had them repaid he was gone - that didn't prove to be the case.

Yeh spot on Value, from memory it was around 20 mill. I think however the loan repayment came from a cap raising, the rest of which was used for expansion plans. I think he pocketed the coin from those S1 crossings Your also right regarding the skeptics, they were saying this company would be toast without Len and it's a one trick pony. Oh yeh you don't see those punters on the forums any more.

I do think my figures might be a bit off though. I consider it unnecessary to troll through the old posts. I did when I needed to get every bit of info and compare however I'm very comfortable holding this stock for the next 5 years.

This swings imho present good opportunities if you have the spare coin to hold. I tried the cfd gig but in times like we've seen over the past few months you'll get burned big time if your long.


I think this is the placement your referring to where they payed back the coin to the big fella.



23 April 2012

ASX Release


NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES OR TO US PERSONS

ASX Code: AGI

Ainsworth Game Technology (AGT) - Announces Fully Underwritten Institutional Share
Placement

Ainsworth Game Technology Limited (“the Company”) is seeking to raise approximately $44 million
via a fully underwritten share placement of 30 million new ordinary fully paid shares (“New Shares”)
to institutional and sophisticated investors at a fixed offer price of $1.47 per share (“Placement”).

The fixed price of $1.47 per New Share represents a 6.1% discount to the last traded price of $1.565
on 20 April 2012.

The New Shares will rank equally with existing ordinary shares of the Company on issue and are
expected to be allotted and issued on 1 May 2012.

The Placement is fully underwritten by Macquarie Capital (Australia) Limited. ("Underwriter").

Use of funds
Funds raised under the Placement will be broadly used as follows:

− $20 million Repay accrued interest owing on previously provided borrowings and trade/credit
facilities provided by an entity associated with Mr LH Ainsworth (Executive Chairman and
majority shareholder)
− $17 million Provide funds to facilitate the cash redemption of outstanding convertible notes
(see below)
− $7 million Provide funds for future growth including acceleration of objectives to supply
products on a participation basis in the Americas, new product initiatives, acceleration and
expansion of research and development activities and additional working capital required on the
commercialization of new product offerings and to cover the costs of the offer

The reduction in debt outstanding under existing facilities will reduce ongoing interest costs, optimize
the Company’s longer term borrowing structure and simplify the Company’s capital structure.

Cheers mate.

 

[Toppy]

Why the huge sell down? I suppose we find out tomorrow one way or another, but anybody have a theory?

 

[skyQuake]

Why the huge sell down? I suppose we find out tomorrow one way or another, but anybody have a theory?

What selldown? Don't see anything large being crossed.

Unless you mean price going lower (prob stops imo)

 

[VSntchr]

The price is entering an interesting territory now.

Not much growth being priced in once it starts going down towards $2.
So is the market factoring in something that isn't glaringly obvious to the rest of us?

The AGM anny speaks of big, well funded competitiors...I think there might be some people taking a lead from this.

Either that, or investors are only looking at the next 6-12 months where earnings will probably be flat and discounting the probability that AGI will continue to grow in the International markets over the coming years.

Interested, but haven't bought any yet.

 

[Ves]

Hey VS, question for you... do you think AGI has a competitive advantage? If so, what is it that they can do in their business model that the well funded competitors won't be able to replicate?

My opinion would be even at $2, if it was a long-term hold, you would still be relying on AGI, to be at least able to protect their current earnings base (think ROIC was circa 30% in 2014), from competitive forces.

I agree... their performance in the previous few years warrants further investigation at this price.

 

[VSntchr]

Hey VS, question for you... do you think AGI has a competitive advantage? If so, what is it that they can do in their business model that the well funded competitors won't be able to replicate?

I can't answer that question Ves, hence why I don't hold. From a basic quantitative perspective it looks good...but qualitative I just have no idea.

My opinion would be even at $2, if it was a long-term hold, you would still be relying on AGI, to be at least able to protect their current earnings base (think ROIC was circa 30% in 2014), from competitive forces.

I agree with you. The only research I really have that supports AGI is the scuttlebut that I had from sources at ALL saying how they still follow every move that AGI makes...
Considering though, that ALL is but one of the competitors that AGI has to contend with..and that the others are also larger...doesn't really give this point much standing.
I have heard that some of AGI machines are favoured by punters and actually bring in a higher amount of revenue than other machines. This was in a research report I read a while back. Additionally, it may be in the interest of machine buyers to keep a number of players in the industry to ensure supply is competitive. The consolidation recently has narrowed the field somewhat.

I agree... their performance in the previous few years warrants further investigation at this price.

IMO investing in many situations involves determining the 'knowns' and the 'known unknowns'. If the price is lucrative enough from a risk reward perspective to warrant risking the 'known unknowns' turning unfavourable then the investment is entered. The unknown unknowns of course are their lurking in the background
Alot of my thinking around this has been developed with the help of reading yours, crafts and others posts..so this might sound a bit familiar for you

 

[prawn_86]

Would anyone not invest in this stop due to the nature of its business? A la ethical investing

 

[Ves]

If I remember I will post down some thoughts when I get around to doing some further research. I will admit I don't know much about this company or the industry. It's great that we can compare to ALL as well.

The comment about players preferring certain machines over others is interesting, I wouldn't have assumed it was that important to them.

This industry is interesting... because it's another where the internet could easily become a very big technology disruptor (I notice that they've mentioned this in the AGM notes & they are trying to position themselves with another internet slots company). Gaining traction on the internet slots business could be pretty important, as I assume, there could be opportunities to create first mover advantages and network effects (there's nothing worse than having to create accounts on multiple sites when all you want to do is play....)

(PS: I almost feel like writing "check the effect of the bloody internet" on a big yellow sticky note and putting it in the middle of my monitor these days.)