程阳：Scientific Games sees China Q3 retail sales up 40 pct

By Sriram Iyer

BANGALORE, Aug 1 (Reuters) - Lottery operator Scientific Games Corp (SGMS.O: Quote, Profile, Research) sees a sequential growth of about 40 percent in retail lottery sales in China for the third quarter and sustainable sales growth in that country over the next few years.

The company now expects retail lottery sales in China of about $60 million a week for the third quarter ending Sept. 30, 2008, up from the second quarter figure of $43 million per week, Chief Financial Officer DeWayne Laird said in a conference call.

Analyst Robert Evans of Craig Hallum Capital estimated that China operations added about $15 million to $20 million in revenue and 2 cents to 3 cents a share in earnings for the second-quarter ended June 30, 2008.

"(Second quarter) is the first data point in terms of real earnings and revenue impact (from China operations) and we expect a more significant impact in 2009 when the company can start producing instant tickets in China," Evans said.

The company said it planned to have one press operational by December 2008 and another by the first half of 2009.

Ticket production in China will improve operating efficiency and a subsequent margin improvement whereas the cost of shipping and importing tickets into China have hurt margins by about 2 percent, the company said.

The estimated investment in China is about $50 million to $60 million, according to Evans. 

"I think China can ultimately become a business that generates $150 million to $200 million in EBITDA in about 3 to 5 years," he added.

Shares of the company rose as much as 8.4 percent before paring some of the gains to trade up 4.19 percent at $31.61 Friday on Nasdaq. (Editing by Jarshad Kakkrakandy)