AWE Ltd (ASX: AWE)

Surging on indicative acquisition proposal: AWE Ltd is gaining some attention with the receiving of an unsolicited, non-binding, indicative and conditional proposal from a subsidiary of China Energy Reserve and Chemical Group. The proposal indicated an offering of 71 cents in cash per share, valuing AWE at $430 million. While the group is yet to ascertain the proposal in detail, the initial reaction does not consider it to be attractive enough for approval and providing access to due diligence. The stock surged up 22.9% on November 30, 2017 post the release of the news. Meanwhile, the group’s operating performance for FY17 has been in line with its guidance with production of 2.75 MMBoe and $105 million as revenue considering impacts from asset sales, impairments and write-down. The group had commenced flow testing of the Waitsia-4 well that will complete the appraisal program on the conventional Waitsia gas field for 2017. The testing program is designed to determine well deliverability from the southern extent of the Waitsia field and to collect gas samples for compositional analysis, and the group has been able to achieve some outstanding results. We give a “Hold” on the stock at the current price of $0.67
 

Waitsia Stage 2 Progress Scorecard (Source: Company Reports)
 

Aristocrat Leisure Ltd (ASX: ALL)

Expansion on social casino gaming footprint: Aristocrat Leisure’s stock charged high before plunging by 6.8% on November 30, 2017, while the group is set to purchase the United States social gaming company Big Fish in order to become the second biggest social casino gaming company in the world. ALL has agreed to pay $1.3 billion for the purchase. It is estimated that the move will double ALL’s digital revenues to about $651 million per annum. The group had earlier snapped up Plarium, to complement ALL’s poker machine manufacturing and existing businesses. Meanwhile, the group’s FY17 net profit after tax has been reported to be up 41% to $495 million from 15% revenue growth to about $2.4 billion. This has come at the back of performance across global portfolio and momentum in Americas. Further, Digital and International CIII segments also supported growth while sustainability was noted in Australia. While the group is positive on its outlook, the International CIII segment might witness a moderation in performance owing to reduction in casino openings with purchase price for Plarium contributing to only a small NPATA part. Further, the price for the latest acquisition seems to bring-up some concerns on cash position of the group. We believe that the stock is still “Expensive” at the current price of $21.99

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