JP Morgan cuts FY2023 rev growth forecast for Aristocrat

May 19, 2023 Newsdesk Industry Talk, Latest News, Top of the deck  

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JP Morgan Securities Australia Ltd has revised downwards its fiscal year 2023 revenue growth forecast for Australia-listed slot machine maker and online gaming content provider Aristocrat Leisure Ltd. The brokerage also cut its growth estimate for Aristocrat’s earnings before interest, taxation, depreciation, and amortisation (EBITDA) for the 12-month period to September 30.

The revisions followed Aristocrat’s results announcement for its financial first half on Thursday. The company reported revenue of AUD3.08 billion (US$2.05 billion) for the six months ended March 30, up 12.2 percent from the prior-year period. EBITDA on a normalised basis were up 5.7 percent year-on-year, to just below AUD1.03 billion.

In a note published on Friday, JP Morgan’s analysts Don Carducci and Michael James said they now expected Aristocrat’s revenue for the 12 months to September 30 to stand at slightly below AUD6.06 billion, a year-on-year increase of 8.6 percent. JP Morgan previously had forecast the firm’s revenue to go up by 10.5 percent.

The two analysts also updated the forecast for full fiscal year 2023 EBITDA to AUD2.05 billion, representing a growth of 11.8 percent in year-on-year terms. The brokerage’s previous estimate pointed to an EBITDA growth rate of 12.7 percent.

JP Morgan however upped by 1.4 percent its forecast for Aristocrat’s full year 2023 net profit after tax and before amortisation of acquired intangibles (NPATA), to just above AUD1.25 billion.

“Our earnings revisions reflect the first half 2023 result and guidance for second half 2023 profit growth in Pixel United,” Aristocrat’s online social games arm, wrote Mr Carducci and Mr James. They also changed their stock price target for Aristocrat to AUD42 from AUD43.

The JP Morgan analysts stated: “Aristocrat’s first half 2023 result received one-off tailwinds from both favourable forex and a significant increase in interest income. Excluding these benefits, the result was a slight miss to our numbers.”

In a presentation accompanying its first half results announcement, Aristocrat reiterated it expected to “deliver NPATA growth” over the full year to September 30. It did not provide a detailed estimate.

Earlier this week, Aristocrat announced a deal to acquire online real money gaming provider NeoGames SA for a total consideration of AUD1.80 billion. The acquisition is to be funded with existing cash, said Aristocrat.

Moody’s Investors Service Inc said in a note that the proposed acquisition of NeoGames would have “minimal impact on credit metrics” for Aristocrat. But the ratings agency warned about “potential integration and execution challenges with the acquisition”, although it noted that “Aristocrat has a good track record with integrating acquisitions”.

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