Intralot - sloth machine
All,
Please refer to our unchanged analysis here.
Intralot results track well at EBITDA level (incl. NL one-off sale), but continue to disappoint us slightly on cash production - chiefly due to higher tax and WC expenses (the latter only temporarily) and - yes - fees. The lower earnings achieved now do not seem to translate into lower tax bills or a release of WC. Moreover, Q4 is typically a weak quarter and even though we have modelled it as such, the company seems to be on a slightly lower trajectory than our model.
The company remains effectively OCF break-even, leaking its large cash position out via CapEx for contract renewals and interest. That has been the theme of the year and is to some E15m YTD due to Covid-19. So, more interesting than Q3 numbers are the restructuring negotiations on which we do not anticipate much news tomorrow. The company is promising to update us soon, but progress is so slow that we are ready to imagine the situation protracting into a stand-off over a payment default next year.
We will therefore mostly listen out for news on the US operations and any other noteworthy items and then slightly revise down our forecast of the business.
We continue to hold the 24s for approx. 2% of NAV.
Wolfgang
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E: wfelix@sarria.co.uk
T: +44 203 744 7003