JP Morgan predicts that growth in the share of the North American market held by Aristocrat Leisure Ltd will increase this year’s earnings at Australian maker of slot machines.
Aristocrat Leisure is usually described by casino industry commentators as having the largest percentage – measured by shipped units – of slot machine products in the Macau casino market.
A note issued on Thursday by JP Morgan Securities LLC gave commentary on the robust profitability of Aristocrat Leisure gaming operations in North America.
JP Morgan forecast that Aristocrat Leisure annual earnings before interest, tax and amortisation in the Americas will rise by 17.5 percent this year to AUD865.3 million (US$627.1) and that annual earnings before interest and tax in Australasia and the rest of world will rise by 6.1 percent to AUD202.2 million.
“Aristocrat Leisure Ltd has strong recurring revenues and is consistently gaining market share in North American gaming operations,” the note says. “Significantly increased digital exposure and title development for both land-based and digital platforms provide further growth.
The Australia-based authors of the note, Donald Carducci and Abhinay Jeggannagari, wrote that: “Capital management opportunities are available, and coupled with strong execution by management and the scarcity of earnings growth in the market, we believe the risk/reward remains attractive at the moment.”
As well as increasing its ship share in North America, Aristocrat Leisure was widening its profit margins there, JP Morgan said.
“North America shows the unique leverage Aristocrat Leisure Ltd is enjoying from incremental sales into the participation market. Incremental installed machines are roughly 80 percent margin,” the note says.
JP Morgan kept its “overweight” rating for Aristocrat Leisure stock, with a price target of AUD35.
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