Aristocrat Leisure Limited
ALL Details
This report is an updated version of the report published on the 29th April 2022 at 3:55 PM GMT.
Aristocrat Leisure Limited (ASX: ALL) operates as a gaming publisher. It provides gaming machines, casino management systems, and digital social games.
Significant Business Updates
- As per the announcement on April 13, 2022, the company appointed Sally Denby as an interim CFO with effect from April 15, 2022.
- State Street Corporation became a substantial shareholder effective on March 3, 2022 with ~34.08 million shares, representing voting rights of 5.09%.
- As announced on March 9, 2022, ALL suspended its mobile gaming division in Russia due to the ongoing Ukraine-Russia war syndrome.
- The proposed acquisition of Playtech Plc did not materialize as shareholders of Playtech cast less than the mandatory threshold of 75% in fovour of the acquisition.
- In FY21, ALL witnessed an 81% jump in NPAT, reaching $864.7 million over the prior year.
Key Financials (Analysis by Kalkine Group)
Key Risks: Changing customer preferences, intensified competition in the online business, and increasing inflation are some of the near-term headwinds impacting the business environment.
Outlook: ALL continue to pursue investment in Design & Development (D&D), with overall investments to revenue to reach 11-12% in the near term. The company is optimistic in enhancing its market share in Gaming operations with an increase in the number of machines and free per day.
Valuation Methodology: Price-to-Earnings Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of ALL has been corrected by ~15.42% in the past three months. The stock just recovered from its 52-week low price of $31.630. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers, considering the rising inflation and its likely impact on discretionary spending. For the purpose of valuation, peers such as Star Entertainment Group Ltd. (ASX: SGR), Tabcorp Holdings Ltd. (ASX: TAH), Skycity Entertainment Group Ltd. (ASX: SKY), and others have been considered. Considering the uptick in FY21 revenues, increased focus on the recurring revenue model, continued investment in D&D, upside potential as indicated by the valuation, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $32.760, as of 29 April 2022, 10:35 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
ALL Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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