Investors in a number of high-tech gaming stocks believe the smart money will be made investing in the technology companies behind gaming machines and analytics. These companies make money by improving the owner returns using technology to analyse and manage machines.
eBet Limited (ASX: EBT) is an electronic gaming specialist based in Australia but with operations all over the globe. eBet works with venue operators to provide gaming machines and support solutions that can boost returns over traditional 'dumb' machines. The company's services include "player tracking, machine management, card-based cashless gaming, loyalty systems and network solutions that enhance the efficiency and profitability of gaming operations". eBet reported a 32% increase in net profit in the first half, expect this to continue in the future.
A similar company in the gaming world is Ainsworth Game Technology Limited (ASX:AGI). Ainsworth sells gaming machines and performs design, development, production, lease, sale and servicing of said machines in-house. Ainsworth's high-tech gaming machines continue to receive strong demand and brokers are increasingly confident in the company's ability to deliver sales growth. It has a PE ratio of 20, indicating that investors believe there is still growth to come, and a healthy dividend yield of 2.5%, which is expected to grow by at least 10% in the next two years. Overseas expansion could be a driver of growth in coming years.
Finally, although it offers lower overall exposure to the gaming technology market, Tabcorp Holdings Limited (ASX:TAH) has a vested interest in the high-tech gaming industry through its gaming management division. Tabcorp Gaming Services (TGS) installs and manages gaming machines on behalf of licensed venues. CEO David Attenborough recently noted that returns from machines managed by TGS generated returns two per cent ahead of those who did not use the TGS service. This is similar to the service offered by eBet, however the company is only focussed on the Victorian and NSW markets currently, versus the global offering presented by eBet.
Foolish takeaway
Venue operators are subject to a huge range of state and federal taxes when operating gaming machines. While their suppliers are also impacted by these taxes and regulatory issues, companies such as eBet, Ainsworth and Tabcorp offer exposure to the back-end functions of gaming venues. The services provided by these companies could be invaluable in years to come when squeezing every last percentage of profit from the machines becomes more important.
