JP Morgan Securities Australia Ltd has upped by 2.4 percent its estimate for Aristocrat Leisure Ltd’s fiscal-year 2023 adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA).
Such earnings for the slot machine maker and digital content provider are likely to be just over AUD2.10 billion (US$1.34 billion) for the financial year to September 30, versus a previous forecast of just over AUD2.05 billion, said the brokerage in a Tuesday memo.
“Strong free cash flow generation means the balance sheet is in excellent shape, even after completion of the NeoGames acquisition and the current share buyback” programme, wrote analysts Donald Carducci and Michael James, in outlook commentary ahead of the gaming technology group’s fiscal-year earnings.
They were referring latterly to online real-money gaming provider NeoGames SA. Under a deal, first announced in May, Aristocrat Leisure was to acquire 100 percent of NeoGames for a cash price of US$29.50 per share. The overall acquisition was valued at AUD1.80 billion, to be funded with existing cash, according to previous information by the suitor.
Aristocrat Leisure had approximately AUD3.5 billion in available liquidity as of March 31, “to support committed and future investments”.
JP Morgan said it expects Aristocrat Leisure to achieve revenue of AUD6.14 billion in fiscal-year 2023, 10.2-percent higher than in the previous year. The firm’s net profit after tax might reach AUD1.24 billion in the 12 months to September 30, compared to AUD949.0 million in the prior year.
In May, the group reported revenue of AUD3.08 billion for its financial first half to March 31, up 12.2 percent from the prior-year period. The company posted an interim profit after tax and amortisation of AUD692.7 million, a 23.2-percent increase from a year ago.
Aristocrat Leisure has three main businesses: Aristocrat Gaming, for the land-based casino and gaming market; Pixel United, for online social games, and Anaxi for online real-money gaming.
“On a group level, we forecast an approximately 1 percent fall in bookings with social casual declines slightly offset by social casino gains,” wrote the JP Morgan analysts.
“It is worth recalling the second half Pixel United profit skew expected to occur in this [pending] result. With a weaker top line, we expect Aristocrat Leisure will have managed expenses in particular user acquisition” costs, they added.
Though the JP Morgan team said Aristocrat Leisure was strong on reinvestment in terms of content development.
“Sustained success requires sustained investment – and we believe over the long term Aristocrat Leisure have built a strong competitive advantage through consistent design and development investment,” said the brokerage.
“Aristocrat Leisure’s 11-percent to 12-percent of revenue design and development [investment] target is well ahead of peers,” stated the analysts.
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