Moody’s Investors Service Inc has affirmed the ‘Ba1’ corporate family rating of casino equipment and digital content producer Aristocrat Leisure Ltd, and changed the outlook to ‘positive’ from ‘stable’.
“Positive earnings momentum will likely continue to support its low leverage, driven by a strong recovery in its gaming operations following the pandemic and growth in its real money gaming (RMG) business,” said Moody’s in a Wednesday press release.
As of March 31, Aristocrat Leisure had total debt of AUD2.26 billion (US$1.51 billion), and liquidity of approximately AUD3.4 billion, according to a May 16 filing to the Australian Securities Exchange.
In April, Aristocrat Leisure completed its acquisition of online RMG business NeoGames SA, which it noted was “funded with existing cash of AUD1.8 billion (enterprise value), reducing liquidity and future interest income”.
Notwithstanding that outlay, Moody’s said in its Wednesday update that its positive outlook for Aristocrat Leisure “reflects the company’s excellent liquidity profile and strong access to capital, with the possibility to move to an unsecured capital structure in the future”.
Moody’s also affirmed the ‘Ba1’ backed senior secured first lien term loan B rating of Aristocrat Technologies Inc, a wholly-owned subsidiary of Aristocrat Leisure, and changed the outlook to positive from stable.
Moody’s said it expected “Aristocrat will maintain strong credit metrics with solid headroom against parameters set for the rating over the next 12-18 months”.
The rating agency expects that the company will manage its growth spending and shareholder returns “prudently” and preserve credit metrics and liquidity “at strong levels for the rating and with leverage staying within its publicly stipulated net leverage target of 1.0x – 2.0x over the medium term”.
Moody’s said the rating affirmation “reflects Aristocrat’s strong market presence and distribution across a diversified geographical footprint, as well as its history of developing products that remain popular among consumers”.
Its credit profile also reflected “the high proportion of recurring revenue in its premium gaming operations and digital businesses, which supports earnings stability”.
The ratings also considered the “cyclical nature of the gaming industry, and the execution risks associated with the company’s expansion into real money gaming, which could increase its growth spending and potential for further acquisitions”.
Although Aristocrat Leisure announced in May, at the time of its first-half results, a “strategic review of its casual and mid-core gaming assets”, Moody’s viewed any “outright sale of these assets as largely credit neutral as reduced operating diversity would be balanced by likely margin improvement given the lower-margin nature of the casual genre”.
Aristocrat Leisure’s mobile games division Pixel United comprises three operating businesses: Product Madness, Plarium and Big Fish Games, along with a number of studios located around the globe.
In May, Aristocrat Leisure said it would “conduct a strategic review” of the group’s “casual and mid-core gaming assets”, including its Big Fish Games – excluding the Big Fish Social Casino assets – and Plarium Global.
“No decisions have been made, and Aristocrat will assess all options to maximise shareholder value and ensure the ongoing success of these businesses going forward,” stated the firm at the time.
Aristocrat Leisure had said in its financial year first-half results that sales in Asia helped boost the group’s revenue to the equivalent of US$2.2 billion.
