Winning Hand

Aristocrat Leisure posted first-half FY17 net profit after amortisation of $272.9 million, up 49% on a year ago and 7% above Ord Minnett’s forecast of $253 million, while an interim dividend of 14 cents per share, 25% franked, was declared.

 

The installed base of Aristocrat’s North American class III gaming operations – traditional casino-style machines – grew 32% in the first half of CY17, highlighting its strong product offering and market share gains. We see continued growth here, forecasting a 23% rise in the second half of FY17.

 

Meanwhile, the international class III business is expected to keep benefiting from the launch of Lightning Link – a series of games all linked by some common features, including progressive jackpots, rather than just an individual poker machine.

 

Aristocrat maintained guidance for growth in net profit after amortisation of 20–30%, which implies a lower second-half result, in line with our forecasts, due to a new product strategy, conversion pricing and leasing model. We see capital management as still possible, with the potential for outperforming guidance.

 

Aristocrat continues to deliver on growth initiatives by developing titles for both land-based and digital platforms. Further digital growth and capital management opportunities are available, with Asian mobile penetration and key product releases. Given strong execution and the scarcity of earnings growth in the market, and despite a challenging and structural slot expenditure decline, we believe the risk/reward equation remains attractive.

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