Lehman initiates coverage with ‘buy’ rating

Monday, Aug. 7, 2000 | 10:51 a.m.

Lehman Bros. gaming analyst Stuart Linde initiated coverage of Anchor Gaming Inc. of Las Vegas Friday, placing a "buy" rating on the stock.

Linde set a 12-month price target of $78 on Anchor, a 32 percent premium over its Friday close of $59. He set a 2000 earnings estimate of $5.36 per share, followed by $6.10 in 2001.

As strengths, Linde cited the strength of Anchor's "Wheel of Fortune" joint venture with International Game Technology, as well as the integration of Powerhouse Technologies, acquired in July 1999 for $290 million.

"(Anchor's) success is often correlated to the penetration of its proprietary gaming devices," Linde wrote. "With these issues in the past and the fundamentals reaching an inflection point in the third quarter of 2000, Anchor appears ready for another one of its patented runs, this time sparked by the success of Video Wheel of Fortune and the numerous opportunities for upside in its other business segments."

Linde projected the company will generate $150 million in free cash flow in the next two years, leaving the company "practically debt free" in 2002.

Anchor rose $6 in Friday trading to close at $59, a jump of more than 11 percent.

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