Ainsworth Game Technology Presentation

8/10/2019 Ainsworth Game Technology Presentation

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Optimum Capital Management Pty Ltd

Investment Thesis for

Ainsworth Game Technology

December 2014Prepared by Heinrich Jacobs

Managing Director & Chief Investment Officer

w: optimum-capital.com.aue: [email protected]

mailto:[email protected]



Disclaimer

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Table of Contents

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Business Overview



Ainsworth Game Technology (AGI)

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*Share price at time of writing

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Products

AGI sells a wide assortment of gaming machines tailored for global markets

Market Australia Americas Europe Asia

No ofproducts 35 32 27 7



$58.5m

$31.9m

$1.0m

$4.1m

$143.3m

$5.3m

AGI is growing its International operations and is establishing a well-diversified business with strategic relationships being developed overseas

Diverse Footprint

Source: Ainsworth’s 2014 Financial Report

Revenue by geography



History of AGI



Intrinsic Value Rising

Has the share price decline been warranted? The Intrinsic Value (Blue Line) ofthe company has steadily been rising and the share price is trading below

Intrinsic Value

*Rising IntrinsicValue

Current share price mostlydriven by marketshortsightedness

Mis-pricing opportunity



Ainsworth Historical Financial Performance

Management has a strong focus on operational excellence through productinnovation, capital discipline and strong execution. As a result, the Company’s

profitability has increased.

Source: Capital IQ

Ainsworth’s Historical EBITDA Performance

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Ainsworth’s Historical & Predicted Earnings Per Share



High Returns on Capital

Source: Capital IQ

(15%)

(8%)

0%

8%

15%

23%

30%

2009 2010 2011 2012 2013 2014



Improving Margins

Source: Capital IQ

-17.5

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17.5

35

52.5

70

2009 2010 2011 2012 2013 2014

EBITDA Margin % Gross Margin %

%



Valuation



Which would you rather own?

1. A 1 year Term Deposit at a 3.25% yield

2. A 5 year Term Deposit at a 4.00% yield

3. Shares in a quality company with an initial 9%, 8.6%, oreven 8.2% earnings yield and growing over time



What’s the pay cheque?

Share Price Current Earnings Per Share (c) Earnings Yield (%)

$2.10 0.19 9.04

$2.20 0.19 8.63

$2.30 0.19 8.26

With the share price at current levels an attractive earnings and dividend yield

is being offered to investors

Share Price Current Dividends Per Share (c) Dividend Yield (%)

$2.10 0.10 4.76

$2.20 0.10 4.54

$2.30 0.10 4.34



Value of AGI

Norm. Earnings - Maint. Capex 50.06

WACC 9%

Cash & Equivalents 71.929

Interest Bearing Debt 0.463Shares Outstanding 322

Total Equity 235

Intangibles 4.701

Earnings Value Power (EVP) $1.95

Tangible Book Value (TBV) 0.72

EVP + TBV $2.67Current Share Price $2.10

Margin of Safety +27.00%

• Combining the earnings power and tangible assets of AGI you have a company conservatively valuedat $2.67 per share and trading at a 27% discount.

Our conservative NO growth valuation is based on the current free cash flow plustangible book value of the company. Since future growth is excluded from the

analysis, only maintenance capital expenditures are subtracted from after-tax EBITand growth is ignored



Target Valuation

But what about growth? Ainsworth is a growing company so we should consider areasonable multiple on EBITDA to arrive at our implied share price valuation

EV/EBITDA 11x 12x 13x 14x

EBITDA(m) 85 85 85 85

Implied EnterpriseValue(m)

935 1,020 1,105 1,190

Cash(m) 72 72 72 72

Implied EquityValue(m)

1,007 1,092 1,177 1,262

Shares Outstanding(m) 322 322 322 322

Implied Share Price $3.12 $3.39 $3.65 $3.91

Valuation Multiples



Risks



Conclusion

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Get In Contact With Us

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mailto:[email protected]

Ainsworth Game Technology Presentation

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