No Reservations on Bingo Breakout
06/27/2003 12:00 am EST
In the breakout section of Ticker Tape Digest --an online site for both short-term traders and longer-term investors-- Leo Fasciocco features technically strong stocks under accumulation (for short-sellers, he also features 'breakdown' candidates that show distribution or technical weakness). His latest pick for an upside breakout is a supplier of interactive bingo and lottery equipment to casinos on Indian reservations. Here's his assessment.
"Multimedia Games (MGAM NASDAQ) is the leading supplier of gaming technology and games to the Native American community. These include bingo and lottery and are located at Native American bingo and gaming halls in the US. Annual revenues are around $290 million. Its Reel Time Bingo is a favorite among players and tribal partners continue to convert to this system. We see this as a great valuation and growth play. For the first half ending March 31, MGAM posted a 29% rise in revenues and a 32% gain in earnings. For the fiscal year ending Sept. 30, we are forecasting a 33% increase in earnings to $2.31 a share. Next fiscal year we expect earnings to climb another 19% to $2.76 a share. The stock sells with a p/e of only ten based on this year’s projected net. The stock’s p/e has been as high as 30.
""There has been heavy buying in the stock recently, suggesting a strong surge in accumulation. Multimedia Games' linked interactive networks connect gaming facilities in more than 100 gaming venues across the country. MGAM institutional sponsorship is very good. Scudder Dreman Small Cap Value Fund is the largest fund holder at 3% of the stock; David Dreman is an excellent value manager and usually early. The 5-star rated FBR Small Cap Value Fund is the second largest holder and was a recent buyer of 185,000 shares. We also rate insider activity as very bullish.
"The subtle accumulation in MGAM makes us very bullish on the stock, especially since earnings will be very strong in coming quarters. We suggest accumulation now in the base with further buying to be done on a move over 25.50. We are targeting a move to 30 to 32 within the next few months. A protective stop can be placed near 22. We rate MGAM an excellent intermediate-term play that could easily double within 12 months."