Sterne Agee has cut its 2014 and 2015 EPS estimates and share price target for Iao Kun Group Holding on concern over rising agent commissions. The firm says it now sees 2014 EPS of $0.29 compared to its previous forecast of $0.45. It sees 2015 EPS of $0.51 from $0.71 previously. The share price target has been cut to $5 from $6.25.
The company has said it will seek to work more aggressively with cash agents and will pay higher commission, which is likely to result longer-term into higher rolling volume. However, until IKGH also loosens its credit policy toward higher-risk/non-cash credit agents, we see margin compression outweighing potential increases in roll from acquired cash agents, it said.