JP Morgan Securities Australia Ltd sees fresh opportunities for Aristocrat Leisure Ltd – a legacy provider of casino slot machines – in the growing digital segment.
“Further digital growth and capital management opportunities are available, coupled with strong execution by management, despite a challenging cyclical environment,” wrote JP Morgan analysts Donald Carducci and Michael James in a Wednesday note.
Aristocrat Leisure has three operating divisions: Aristocrat Gaming, the group’s land-based gaming technology segment; Aristocrat Interactive, the firm’s segment focused on online real money gaming (RMG); and mobile games division Pixel United.
In the shorter term, JP Morgan has cut its earnings estimates for Aristocrat for the financial year to September 2025, it outlined in its memo.
It coincided with Aristocrat’s results for the financial year to September 30 this year, and Tuesday news that Aristocrat was selling its social gaming unit Plarium Global Ltd for a “fixed consideration” of US$620 million.
The gaming technology group had posted for the latest financial year a net profit after tax and before amortisation of acquired intangibles (NPATA) of close to AUD1.56 billion (US$1.01 billion), a 17.2-percent increase from a year ago.
“Our earnings revisions [for financial-year 2025] reflect a number of moving parts,” said JP Morgan.
These included: “NeoGames… fully consolidated through financial year 2025; Plarium operations divested first-half calendar year 2025,” wrote the analysts.
Aristocrat said in April that it had completed the acquisition of RMG business NeoGames SA, for a total consideration of AUD1.80 billion.
JP Morgan has cut by 7.3 percent its Aristocrat revenue forecast for fiscal-year to September 2025, to AUD7.01 billion. It trimmed by 3.2 percent the outlook regarding earnings before interest, taxation, depreciation and amortisation (EBITDA), to AUD2.77 billion.
Its projection for Aristocrat’s NPATA, is reduced by 4.0 percent, to just over AUD1.69 billion.
The brokerage’s estimate for Aristocrat’s aggregate distribution of dividend per share for the financial year to September 2025 is put at AUD94.0 million, a reduction of 3.6 percent on its prior forecast.
JP Morgan said that for the financial year to September 30 this year, Aristocrat’s “cash conversion was… slightly weak, with a receivable/payables drag”.
The institution added: “With capital expenditure ahead of depreciation and amortisation, the net result was free cash flow below NPATA for the period.”
Fitch Ratings Inc affirmed in a Wednesday memo that the ‘BBB-’ ‘positive’ long-term issuer default ratings of, respectively, Aristocrat Leisure, Aristocrat Technologies Australia Pty Ltd, and United States-based Aristocrat Technologies Inc, were “unchanged” amid the sale of Plarium, part of the group’s Pixel United division.
The ratings house stated: “Fitch believes Aristocrat will see improved revenue growth and margins following the divestment of its mid-core segment (32 percent of Pixel), which focuses on the role-playing games, strategy and action genre, a division that has witnessed slower growth since 2021 due to market trends.”
The ratings agency added: “Aristocrat expects to deploy the sale proceeds to fund its longer-term growth strategy, which Fitch believes could either be via reinvestment, share buyback and/or material merger and acquisition, rather than debt pay down.”
