Expecting a strong result
Aristocrat Leisure (ALL) is due to report its FY18 result on the 29th of November, which will include partial contributions from the Big Fish and Plarium acquisitions undertaken during the year.
We forecast revenue of A$3,616m, up 47% and in-line with Factset consensus expectations. We forecast NPATA to rise 41% to A$767m (consensus at A$734m) and expect a final dividend of 30 cents per share to be declared.
Well positioned heading into FY19
Strong performances from Lightning Link, Dragon Links and Buffalo Grand, which are all still running at multiples of floor averages, should result in increased demand from customers and see Aristocrat increase ship share in the participation market in North America. Additionally, the release of Buffalo Diamond and other new premium game releases including Billions, Madonna and West World will complement the successful Game of Thrones game which continues to perform well.
The launch of Dollar Storm late in FY19 should also drive strong customer demand. We also believe ALL is well positioned in the social casino and strategy/RGP/casual gaming markets following new game releases and a strong existing library of titles.
Changes to forecasts
We have taken the opportunity to increase our Design and Development (D&D) expenditure over the next few years as Aristocrat seeks to be a market leader in the segments in which it competes. In addition to these changes we have tweaked some divisional forecasts and reduced our FY19+ AUD/USD exhange rate forecasts to A$0.74 (from A$0.77).
As a result we increase our earnings per share by 0.9% in FY18, 2.6% in FY19 and 2.8% in FY20.
The recent pull-back in high PE stocks and the gaming sector more broadly has created an excellent buying opportunity. Following changes to our forecasts we have increased our share price target (Morgans clients can login to view). Key risks include increased regulation and competition, slowing customer demand, acquisition integration and the AUD/USD exchange rate.
Aristocrat Leisure (ALL) is our key pick in the sector. We retain our Add recommendation.
Morgans clients can login to view our detailed report and increased share price target for Aristocrat Leisure (ALL). Alternatively, please contact your nearest Morgans office for access.
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