Shuffle Master (SHFL): Recent turmoil may prompt takeover interest - Deutsche Bank

From Notable Calls

Deutsche Bank notes they have uncovered that Shuffle Master's (NASDAQ: SHFL) Board of Directors has engaged an executive recruiter in order to replace Chairman and CEO Mark Yoseloff. Firm believes Yoseloff is cooperatively involved and that this ultimately should be positive for SHFL.

Yoseloff has been with SHFL for a decade and during his leadership revenues have grown nearly tenfold to approximately $200m. He has been vocal over time that his operating sweet spot tops out around these levels of revenue. Yoseloff's strength has clearly been product development and they'd expect for him to remain affiliated with the company in some type of product strategy and development capacity once a replacement is named.

According to Deutsche, the combination of this CEO search and recent departure of CFO Rich Baldwin suggests turmoil that may prompt takeout interest. SHFL dominates the table pit with utility and entertainment based products and is ahead of the curve with its video table initiative. Enviable free cash flow and favorable secular expansion backdrop should put SHFL on the grid for a number of parties.

Notablecalls: Nice call by Deutsche Bank's Bill Lerner. Expect SHFL to trade up in the n-t. This thing has been crushed over the past months and has a close to 20% short interest. That's an explosive combo.

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