Lowering Estimates, Maintain Hold

3/18 - "Rev came in nearly $10M below of our est due to weaker than expected ent product sales driven by lighter than expected EGM and electronic table game sales...Operating expenses came in significantly higher than we expected, due to increased SG&A to support future growth in foreign jurisdictions and slightly higher than expected R&D expenses."

"We are lowering our FY08 and FY09 ests by 13 cents each to $0.31 and $0.45, respectively. Our reduced estimates primarily reflect the Q1 miss, higher OpEx, and a higher tax rate assumption...We maintain our HOLD rating on shares of SHFL and our new PT of $8.00 is based on a P/E multiple of 20x our FY09 estimate discounted back 1-yr."

"...a major overhang on SHFL shares remains its $150 convertible bond putable by investors in Apr 09...we believe the company will likely be forced to refinance its debt at much higher rates diluting existing FY09 estimates...We believe SHFL shares may be appropriate for new investors looking for a turnaround story with a long-term horizon; however in the near to medium term we look for reduced earnings and we caution investors on the company’s capital structure."