Consumer cyclical

Aristocrat’s HY earnings beat gets market’s thumbs up: $500m buyback

Thu 19 May 22, 1:44pm (AEST)

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Key Points

  • Further acquisitions in the online RMG space
  • Revenue up 23% to $2.75bn at half year
  • Aristocrat plans to return up to $500m via on-market share buyback

Bucking the broader market’s downward trend this morning, Aristocrat Leisure (ASX: ALL) shares were up 4.30% heading into lunch today following the poker machine giant’s announced plans of a major share buyback.

After raising $1.3bn for its failed takeover crack at UK gaming software company Playtech, Aristocrat now plans to return up to $500m to investors via an on-market share buyback.

CEO Trevor Croker plans to take an “opportunistic” approach to the said buyback, effective from June.

Acquisition trail

Beyond returning cash to shareholders, what also captured the market’s imagination today were revelations that the group wants to advance its own real money gaming (RMG) strategy.

Despite Aristocrat’s Failed $3.9bn bid for Playtech, the group still plans to become the global leader in the burgeoning online gaming sector.

Further acquisitions are clearly in Aristocrat’s sights, with Croker favouring a “build and buy” strategy to develop “scale in the online RMG space, which would provide further channels for the group’s world-leading content.

“Our ambition is to be the leading gaming platform in the global online RMG industry, and we anticipate being live with i-Gaming products in two jurisdictions in the US by the end of calendar year 2022,” Croker noted.

No upper limit

While the group will have $800m to invest in its build and buy strategy after executing the $500m buyback, Croker made it clear to investors that this was by no means an upper limit on its growth-by-acquisition strategy.

“We’re not constrained to a number, but we are very disciplined in our approach to M&A…our sustained investment in talent, technology and product enables us to continue to take share wherever we play and delivered significant top and bottom-line growth in the first half of fiscal 2022,” Croker concluded.

Highlights of the group’s six months to March 31 result announced today include:

  • Revenue up 23% to $2.75bn

  • Fully franked interim dividend of 26c a share, payable 1 July.

  • 41% growth in normalised net profit to $580m

  • Earnings of $970m is 30% higher

  • Group revenue increased to $2.7bn, up 23.1% in reported terms

  • Operating cash flow increased 42.0% to $502.4m compared to the previous period

Looking forward

Aristocrat has entered the second half with solid fundamentals, strong operational momentum, and a robust balance sheet with gearing (net (cash)/debt to earnings) further reduced to (0.3x), and in excess of $3.3bn of liquidity available as at 31 March 2022.

Aristocrat’s plans for continued growth over the full year to 30 September 2022, include:

  • Continued market-leading positions in Gaming Operations

  • Sustainable growth in floor share across key Gaming Outright Sales markets

  • Growth in Pixel United bookings and profitability

  • Continued D&D investment to drive sustained, long-term growth

  • Further investment in core business capability



Aristocrat share price: A 12 month snapshot.

What brokers think

Consensus on Aristocrat is Moderate Buy.

Based on Morningstar’s fair value of $38.32, the stock appears to be undervalued.

Based on the brokers that cover Aristocrat (as reported on by FN Arena) the stock is currently trading with 39.9% upside to the target price of $46.25.

Ord Minnett notes the trend towards higher quality users continues, with higher Average Bookings per daily active users (DAU) more than offset declining DAUs.

With reported financials well above the estimates, the broker retains an Accumulate rating and target price of $49.00.

Goldman Sachs, which is Buy rated on Aristocrat with price target of $43.00, notes today’s digital revenue numbers confirm the ongoing shift of the group’s revenue to its commission free PC based Plarium Play platform, now accounts for 27% of Plarium revenues, up from 20% in FY21.

The broker also expect penetration of RAID on the group's platform to be significantly higher.

Written By

Mark Story


Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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