Hedgeye - IL VGT SEPTEMBER UPDATE

At the end of September, there were 10,250 VGT’s up and running, up 9% (833 units) MoM
- Since the market opened last September, average monthly installations have trended at 849 units
Using an average of the machines outstanding at the end of August and September, average daily win per device was $100/day in the month of September, in-line with the average for the last 3 months. As the chart below shows, despite recent added supply, daily win day has remained steady around the $100 level.
As of October 24, there were still 1,554 establishments pending approval. If approved, these establishments can add a maximum of an additional ~7,770 machines. This implies a market size of roughly 18-20,000 VLTs, unless Chicago opts in. At the current pace of installations, we expect shipments to IL to taper off materially by the summer of 2014.
Supplier impact:
- IGT has been shipping about 1,000/ Q to IL which translate to about 5 cents a year of EPS impact
- During the last 2 quarters, BYI’s shipped 1,369 to IL and 1,943 units over the last twelve months. An additional 2,000 VGT unit shipment to IL should translate to about $0.25 cents in earnings for BYI.