Would you be able to estimate the value of PBL should they be unsuccessful to bid on any new iLottery contracts once the current NPi iLottery contracts expire? Where would the stock trade at in this worst-case scenario, if PBL remained a classic scratch card business along with its charitable gaming part? Thank you.
This would likely have a significant impact on PBL's share price because for the full year 2023, iLottery sales were $108.3M representing 18% of total combined sales and $14.9M (40%) of income before taxes. While PBL is an industry leader in the instant-ticket/charitable gaming spaces, these are not exceptionally high growth or high margin businesses. The iLottery business is effectively PBL's higher margin growth driver so if all contracts through the joint venture were lost, things would look much less attractive. We think trading somewhere in the $10-$15 range would make sense as PBL still has a cash generative model that could perform well in an economic upcycle, however, sales and earnings would be cut down rather significantly. To lose all iLottery contracts would be a very extreme scenario and we think the company picking up new contracts is more likely right now.