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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Gavin Isaacs dealing winning hand at Shuffle Master

19 June 2012

Less than 48 hours after Shuffle Master, Inc. said the company's profits surged 23 percent in the second quarter, executives from the gaming equipment provider flew to New York City and held an "analyst day" for the investment community.

Call it a victory lap for Gavin Isaacs, who in April completed his first year as Shuffle Master's chief executive officer.

That afternoon, Isaacs and his company's executive team rang the closing bell at the Nasdaq National Market, celebrating Shuffle Master's 20th anniversary on the stock exchange.

He tweeted out to his followers, "every day we're shuffling."

During the past 13 months, Isaacs has provided the direction to boost results in Shuffle Master's four key business segments -- utility products (automated card shufflers and table game management systems), table games (Three Card Poker, Let It Ride, Ultimate Texas Hold'em and other games), electronic table games and electronic gambling machines.

Shuffle Master hopes to break out its entry into interactive gaming as a fifth division later this year, once the company's $28.5 million acquisition of European online gaming provider Ongame Network Ltd. is completed.

No wonder Shuffle Master spent $2.2 million for a 9-acre site near Jones Boulevard and Interstate 215 that will house the company's new corporate headquarters and manufacturing office by the fall of 2013.

Meanwhile, in the second quarter, Shuffle Master saw its revenues jump 10 percent.

Isaacs told investors the company expects "continued strong momentum across our core businesses."

One casino industry insider said he invests in any publicly traded company involving Isaacs, who was the chief operating officer at Bally Technologies before joining Shuffle Master.

The insider said he doubled his investment in Bally and had similar experience since Isaacs took over at Shuffle Master. When Isaacs arrived, shares in the company traded at roughly $8. Today the shares hover in the $15 range.

"He is the best CEO in the gaming space," the insider said.

Added Janney Montgomery Scott gaming analyst Brian McGill: "We have a high degree of confidence in Isaacs and his deep industry knowledge to continue to grow the company through smart investment decisions and acquisitions."

Other analysts had similar sentiments following the New York City meeting.

"Overall, we would characterize the tone of the presentation as positive," JP Morgan gaming analyst Joe Greff told investors.

Ongame is Shuffle Master's key initiative. The business is a subsidiary of bwin.party Services of Austria, one of the world's largest poker providers to online gaming operators.

Shuffle Master said the transaction would allow the company to expand its online offerings in regulated gaming markets.

McGill called Ongame "an outstanding acquisition" that could allow Shuffle Master to break into the online poker business in U.S. states that legalize the activity, including Nevada.

"We think Ongame will be one of the major poker network providers, given its technology and the fact that it can get licensed over foreign rivals much easier," McGill said. "With a balance sheet that will be close to net cash by the end of the year, the company should be able to pursue additional acquisitions for growth."

Greff said Shuffle Master's plan to separate the company's interactive and online strategy into its own division should please investors.

"Management didn't provide a great deal of new information/market specifics for its online strategy given the pending nature of its Ongame acquisition." Greff said.

Until the Ongame deal is done, Shuffle Master will continue to shore up its other business segments. The leasing of automated card shufflers will provide a growth opportunity. The company already has its machines on almost 65 percent of the world's 47,000 gaming tables, and 4,500 gaming tables could open in the next three years.

Meanwhile, Shuffle Master continues to bring out new table games -- some are successful and some end up as a footnote on the balance sheet. The company displayed several new games on analyst day, including Fire Bet and Blackjack Switch.

Isaacs and other company leaders said the dealerless electronic table games division is getting a makeover that it will launch at the Global Gaming Expo in Las Vegas this fall. Management said the best growth opportunities for the division are in Asia with its Rapid Bet multigame product.