Cash Systems, Inc. initiated with a “buy” rating
Provider of cash access products to the gaming industry Cash Systems, Inc. (Nasdaq: CKNN) was initiated with a “buy” rating by Merriman Curhan Ford Tuesday.
Merriman Curhan Ford analyst Eric Wold initiated recommendation based on his perception that the company will take share in the casino cash access industry through the introduction of its new patented technology “powercash.”
“[Powercash] should help casinos put more cash into patrons’ hands quicker while driving incremental high-margin revenues to Cash Systems,” Wold wrote in a research note.
Cash Systems’ powercash technology enables casino goers to conduct cash access transactions directly at the slot machine or their table—whether it is through ATM cash withdrawals, credit card or debit card cash advances, or electronic check cashing.
As cash access becomes a larger focus for casino operators Cash Systems should benefit. Wold said he believes the debut of powercash will spur incremental cash transactions and higher margin cash access transactions.
“The rollout of powercash to existing casino customers will lead to… incremental casino customer wins through a patented technology that no other company can offer,” Wold wrote.
Wold forecasts a loss for fiscal year 2007 of $0.10 compared with a loss of $0.57 for fiscal year 2006. However, Wold expects acceleration in Cash System’s revenue and margin growth in fiscal year 2008 and estimates a profit for fiscal year 2008 of $0.25 per share.
Wold’s estimates are above the EPS consensus of $0.12 fiscal year 2008. Wold’s estimates take into account the potential benefit of powercash during its first full year after introduction.
Cash Systems currently trades at 7.7 times Wold’s fiscal year 2008 EBITDA estimate, which compares with an average of 11.5 times for the gaming equipment industry. Wold said he believes a premium multiple of 12-14 times EBITDA can be achieved.
Shares of Cash Systems traded up 1.59% or $0.10 to $6.40 in mid-morning trading Tuesday.
