AGS Texas Opportunity not Reflected in Share Price, Says Analyst

Following cobbler's last week’s Supreme Court ruling that paves the path for the Ysleta del Tyre Pueblo folk to offer up bingo games nigh its El Paso reservation, AGS (NYSE:AGS) stock up could offer Texas-sized chance that’s not currently reflected inwards the portion price.

That’s the sentiment of Philip Roth Capital analyst Edward IV Engel who rates AGS “buy” with a 12-month damage place of $11, or more than treble where the gillyflower currently trades.

After the Supreme Court late ruled inward favour of the Tigua Indians operating Class II gaming inward Texas, we don’t believe this overhang removal or growing opportunity has been reflected inward AGS shares,” writes Engel in a mention to clients. “Prior to the ruling, investors were discounting ~$10-12M of high-margin revenues for AGS, where an unfavourable ruling would make wiped these out. Rather, the favorable ruling now presents a ontogeny chance for AGS, as deuce tribal casinos in TX are to a greater extent potential to expand gambling casino floors.”

Ysleta del Tyre Pueblo, on with the Alabama-Coushatta — another TX folk — could follow beneficiaries of the Supreme Margaret Court ruling. So could AGS because gaming expanding upon inward Texas could growth demand among the company’s tribal clients there.

Texas Gaming Expansion Possible

As the second-largest US state, TX is a coveted destination for both commercial-grade and tribal casino operators, but the country has long been reluctant to encompass cassino gaming.

Tribal gaming entities in Sooner State and commercial-grade operators inwards Louisiana feature also opposed casinos inwards Texas are believed to pressure group body politic politicians there to that effect. With that, it remains to be seen if the Supreme Margaret Court ruling testament leading to tribal casinos in the state, but it’s unmortgaged any additional gaming there could benefit AGS.

“The Tigua Indians run a Class II cassino in El Paso, with a local population of ~700k. The Alabama-Coushatta folk operates a Class II gambling casino ~90 miles from Houston, making it the closest gambling casino to Houston, vs. the pop Lake Charles, LA cassino ~140 miles away,” adds Engel. “Prior to the ruling, both tribes had been reluctant to follow attribute expansions, despite evident mental ability constraints inwards both markets. Following the ruling, we would wait both tribes to foretell expansions inward both gaming and non-gaming footprints.”

Most of AGS customers are inward Florida, Oklahoma, and TX and the fellowship applauded the Supreme Margaret Court decision.

For AGS, Cheap Stock, Big Opportunity

AGS could be on the cusp of something meaningful inward TX and a slip tin live made that opportunity isn’t full apprehended by the investiture community.

“The Tigua and Alabama-Coushatta tribes run just now ~1,500 and ~800 Class II devices, respectively, where AGS supplies EGMs to both properties,” notes Engel. “Alongside any dimension expansions, we would await AGS to get its just portion of both expanded gaming floors. This implies a meaningful turnaround vs bearish expectations that AGS would turn a loss its footprint inward the state.”

AGS is discounted relation to peers and with its buy in slumping, it could deploy cap from an older buyback program to repurchase some of its share.

“Prior to the ruling, we believed AGS’s rich discount vs. peers was part attributable to investors discounting Lone-Star State operations, which represented ~5% of revenues. Recent transmission channel checks with gaming suppliers and operators designate no softening inward gaming consumption, despite investors pricing inward recessive outcomes,” concludes Engel.