ARDENT LEISURE GROUP

Ardent Leisure Group  (ASX:AAD) posted a rise in net loss that moved from $62.6 million in 2017 to $88.6 million net loss on a pro-forma basis up to 30 June 2018. Non-cash valuation losses on the Dream world and Skypoint properties, recurring restructuring costs as well as the continued challenging post –incident trading conditions for the Themes Parks division, impacted the current year growth rate. Reduced revenue of $89.4 million for the discontinued businesses led to $29.7 million decline in the total pro-forma as compared to the prior year. Proforma EBITDA for continuing businesses declined by $19.8 million and proforma EBITDA for discontinued operations declined by $3.18million, resulting in a total pro-forma EBITDA being $51.6 million lower in comparison with prior year. EBITDA was impacted by a non-cash impairment charge of US$28.4 million associated with five underperforming locations, repayment of debt from the sales proceeds and reduction in debt facilities posted dip in borrowing costs by approximately $1.8 million to $10.4 million in 2018 in comparison to $12.4 million in  2017.

Technically the scrip has touched the higher levels of $2.08 in the month of July, after which complete downtrend was seen on the price chart. Price charts are indicating the lower lows. Scrip touched the 52 week low levels of $1.58 on October 24, 2018 .The scrip is currently trading at the lower Bollinger band. With lower lows and stock trading near lower Bollinger point , some bounce back is expected once reversal candle is formed on the charts. In the long run, we expect that the group will have some slowdown in its growth line backed with weak financials. The stock has a market capitalization of $765.13M, annual dividend yield of 5.33% and beta of 1.7x  as on October 24, 2018,  exhibiting a “Hold” scenario at the current juncture. We, therefore, maintain our “hold” recommendation on the stock at the current market price of $1.585.

ARISTROCRAT LEISURE LIMITED

Aristrocrat LeisureLimited (ASX:ALL) reported a 32% increase in normalized profit after tax and before amortization of acquired intangibles of $361.5 million for the period  1H2018, compared to $273 million in the prior corresponding period.

Growth in Americas, in broadly flat markets, and Digital with the Product launch of Cashman Casino in addition to the acquisitions of Plarium Global Limited (‘Plarium’) in October 2017 and Big Fish Games Inc. (‘Big Fish’) in January 2018 boosted revenue by more than 33%. Normalized fully diluted earnings per share before amortization of acquired intangibles reported 33% increment up to 56.6c in comparison to the prior period. Net gearing ratio on a pro forma basis increased to 2.0x from 0.9x due to the acquisitions of Plarium and Big Fish, funded via cash and incremental Term Loan B debt facility. Segmental revenue increased by $412.7 million (33.6%) in which growth in gaming operations and Digital was supported by the launch of Cashman Casino and the acquisitions of Plarium and Big Fish. Net interest expense increased by $13.9 million in 1H2018 to $43.1 million, reflecting the increased debt levels to support the acquisitions of Plarium and Big Fish.

Technically Aristocrat Leisure Limited showed signs of recovery in October and the scrip touched the higher levels of $29.69 lately which was also the upper zone of Bollinger bands. The price charts are indicating the formation of lower lows along with negative divergence set on relative strength indicator. The scrip is currently trading above the mean deviation of Bollinger bands. We are keeping a close watch on the scrip as chances can be that scrip takes the major support around $ 28. In the long run, we expect that the group with its investment strategy  in a better and broader product range through new talent and new technology, with ongoing efficiencies reinvested in core product development and capability will provide  strategic growth opportunities. The stock has a market capitalization of $18 Bn, a price-to-earnings ratio of 35.6x and a beta over 1x as of October 25, 2018. While the stock is moving on a higher side, we have a wait and watch view for a price dip that may open up a potential investment theme. ALL last traded at $ 26.750 and has strong financials and growth opportunities.


Gaming Segments (Source: Company Reports)
 
 

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