The global economy is expected to sustain above-trend 3.2% real GDP growth in 2018. Compositionally, this assumes better growth in emerging markets excluding China (primarily India and Latin America), a modest slowdown in China’s growth, and a steady Europe and US. By comparison, economic growth in Australia is set to come in at a below-average pace of 2.8%. Corporate earnings growth overseas is also forecast to be double that available in Australia over the next 12 months, at 10% versus 5%. Based on our currency views, regional earnings growth forecasts and outlook for offshore equity markets, we think having some global exposure still makes sense. Slot machine manufacturer, Aristocrat, is a new addition to this list, with around 80% of revenues sourced offshore, primarily in the US, but also in Asia and Europe. The company is also diversifying its revenue sources by investing in the high-growth digital space as consumers shift towards online gambling channels. The acquisitions of Plarium and Big Fish will make Aristocrat the second largest Social Casino publisher globally by revenue, and will improve its pro-forma recurring revenues from 57% to 65%. Other options for exposure to offshore growth include Boral (building materials provider leveraged to US construction and re-build activity, as well as local infrastructure works) and Ramsay Healthcare (hospital operator with a strong balance sheet to strengthen its existing presence in Europe).
Company
|
Rating
|
Risk
|
Target price
|
Est. % in global sales
|
Aristocrat
|
Accumulate
|
Higher
|
$24.20
|
80%
|
Boral
|
Hold
|
Higher
|
$6.70
|
45%
|
Ramsay Health Care
|
Accumulate
|
Medium
|
$80.00
|
49%
|
Source: Ord Minnett Research