Pollard Banknote Ltd T.PBL

Stephen Tacaksy on BNN - Top Pick

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Pollard Banknote (PBL TSX)

Pollard is the second largest supplier of instant lottery tickets in the world and a leader in electronic lotteries in the U.S. (iLottery). There are only three players licensed in North America, so barriers to entry are huge. After a big run to over $60, Pollard’s stock has pulled back to a very attractive level of $25 due to some margin compression on higher input costs for paper, ink and foil, as well as some production inefficiencies due to overly strong demand and sales delays on higher margin products. The North American instant lottery market continues to grow as governments use it as an important source of funding, while state iLotteries are still in their early days. We expect 2022 could be another record year for Pollard. It’s such a great business that Brookfield Business Partners is paying US$6 billion, or nearly 14 X EBITDA, for Scientific Games’ instant lottery business, which would value Pollard at over $40 per share.
 

TOP PICK

Pollard Banknote Ltd(PBL-T)

28/03/2022 at 08:00pm

 

It's the second-largest supplier of lottery tickets in the world and the leader in electronic lotteries in the U.S. There are three such companies in North America, so there's a good moat. The stock has fallen to attractive levels. Demand for lottery tickets is so high that these companies are struggling to meet demand, though they face higher input costs (for paper and ink). PBL has added an extra shift to production lines. 2022 could be a record year for sales, though margins may not beat records. Brookfield is buying one of their competitors, which is a good sign. This trades at 9x earnings. Well-run with strong growth ahead, because governments needed money (through lotteries). (Analysts’ price target is $37.25)

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$24.830

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