Aristocrat Leisure Limited
Setting for defence against a lawsuit filed in the US:Aristocrat Leisure Limited (ASX: ALL) seems to have come under a trap in view of the latest law suit update announced by the group. Primarily, as on February 11, 2019, a lawsuit was filed by the Plaintiff Manasa Thimmegowda in the US district court for the Western District of Washington seeking redress against Aristocrat Technologies Inc., Big Fish Games Inc., Aristocrat Leisure Limited and Churchill Downs Incorporated. This has been with regards to certain games said to be offered by Big Fish Games (acquired by ALL to enhance the digital segment)and alleged to come under the purview of prohibition by Washington law.
Till now, none of the Aristocrat parties and Big Fish have been served with the complaint for the lawsuit. However, Aristocrat intends to vigorously defend the allegation by the Plaintiff.
Despite this, the stock edged up by 0.24% as at February 19, 2019.
FY2018 Financial Metrics (Source: Company Reports)
Meanwhile, group’s gross margins, EBITDA margins, and net margins stood at 55.6%, 37.2%, and 15.3% in FY18 against the industry medians of 53.9%, 21.7%, and 11.0% respectively. It represents, a decent company performance during the period as compared to its peer group. Its current ratio was reported to be at 1.33x better than the industry median of 1.10x which indicates that Aristocrat is in a better position to address its short-term obligations than its peer groups. The consensus EPS growth in high single to double digit might also look attractive for the next 12-24 months, however, the circumstances are still volatile.
What to Expect From ALL: The company has a positive outlook for FY2019, and it expects incremental gains in attractive North American adjacencies, in addition to maintaining market-leading share positions across key for sale segments globally. It also expects growth in bookings supported by new game releases with a significant increase in User Acquisition spend (approx. $100 Mn) as it invests to drive a diversified Digital portfolio.
Meanwhile, Aristocrat Leisure’s share price has fallen by -3.91% in the past 3 months whereas it has risen 5.31% in last one month. However, the stock has posted the return of -19.97% in the past 6 months. Hence, we recommend our investors to keep this stock under their watchlist at the current market price of A$24.870 per share and should wait for further growth catalysts ahead of the shareholders meeting due in next few days.
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