Jackpot Joy PL (JKPTF-5)

Stock was attacked by a Short group. The board finally refuted the allegations, saying the math was erroneous. A good outcome was that the CEO and CFO have stepped down. Trading at 4X earnings and a 23% free cash flow yield. There could be a corporate sale and you could see well over 50% upside.

Not a big fan of this, largely because he is not very comfortable with the management team.

Online bingo that has 40%+ margins, a huge retention rate of clients, so this is a very strong recurring revenue model. Trading at 5X next year’s earnings and 4X 2017 earnings. The stock fell from $12.50 to $6.75 on some bogus Short report. He is looking for 20% growth.

Got hit with a Short- Sellers report. Likes the online bingo market, and feels there were a lot of inaccuracies in that report, but this is going to overhang the stock for a while. (See Top Picks.)

Has always been a bit leery about this. Prefers NYX Gaming (NYX-X) as a more conservative way to play. Q3 numbers were good, but Q2 numbers weren’t. One of the things that really caught investors’ attention was a very generous payout package that was afforded to management.

(Top Pick Nov 19/14, Down 7.71%) He still really likes it. It was doing fairly well and then they had issues with compensation. They were dragged down by AYA-T earnings, which he thinks was unwarranted.

Chart shows a bottom in December-January, followed by a slightly higher bottom in August-September. This gives a slightly advanced growth channel and he expects it to go back up near its $17-$19 level.

A name that has been fairly volatile. A lot of online gambling stocks have been impacted by Amaya (AYA-T). Amaya got access to New Jersey, and it was thought the level of scrutiny they went through was extremely high, so any of the allegations still being investigated should have been cleared. As that becomes more and more disseminated you should get a lift in the online gambling space. There was also a question of a compensation plan which has now been cancelled. This is the world’s largest or 2^nd largest online Bingo. The stock is bloody cheap trading at around 6-ish times of forward consensus. On his radar screen and if it falls much further he will be adding it. (See Top Picks.)

There is kind of a nice aspect to this, in that it is into social gambling, as opposed to being in the Las Vegas type of gambling. The group seemed to be very competent in building in this area.

The CEO and CFO are being compensated based on the value of acquisitions they have made. This has been controversial. He thinks the management team will be quite reasonable going forward. There is a large seller in the market place due to the compensation structure, but he would be buying more. He thinks they will grow the business and would not be surprised at a stock buyback.

This is in regulated gaming Bingo in the UK and has done extremely well. The numbers have been coming through very strong. Just got added to the index, so you are going to see a lot of index managers buying the name. This is a good opportunity. Trading at about 12X this year’s earnings. He would buy it now, but wait for a bit of a pullback. He could see $26 within 12 months or so.

You don`t need to go down the market cap in this sector. It is not a small company any more. They have associated with AYA-T. They are the world leader. They bumped up their forecast and it is not based on acquisitions, even though they can make good ones. It is mispriced. It got associated with the insider trading scandal at AYA-T. The sector is growing fast enough that there is room for more players.

He likes uncrowded trades, and this is a very popular trade, so he would be cautious about this. Would prefer Great Canadian Gaming (GC-T) as a safer play. Has been thinking about a possible Short on this.

Internet gaming company. Earnings are expected to grow extremely significantly this year and 30% in 2016. Has a 9.5 PE multiple.

This and a couple of other gaming stocks did very well last year. Part of the reason was that people were looking for anything that was non-resource for a large cap investment. This had a nice growth profile in terms of its acquisitions. At this price, there are worse places you could put your money.