Aristocrat Leisure: Model update - Including Playtech in estimates
About the author:
- Author name:
- By Alexander Mees
- Job title:
- Co-Head of Research and Senior Analyst
- Date posted:
- 23 October 2021, 11:00 AM
- Sectors Covered:
- Gaming and Retail
- On 18 October, Aristocrat Leisure (ASX:ALL) announced the proposed acquisition of UK-listed real money gaming business Playtech (PTEC-GB).
- We have now updated our model to include PTEC in our estimates.
- Our EPSA estimate for FY23F, the first full year of ownership, increases by 7%, which is consistent with ALL’s guidance of mid to high single-digit accretion.
Forecast and valuation update
Our EBITA estimates increase by 2% to $1.56bn in FY22F and 17% to $2.02bn in FY23. Our NPATA estimate is flat at $1.08bn in FY22F and increases by 13% to $1.39bn in FY23.
Our EPSA estimate for FY22 reduces by 4% to 162c, reflecting the dilution from 31m new shares for 10 months of the year, compared to only 3 months’ earnings contribution from the acquisition. Our EPSA estimate for FY23 increases by 7% to 207c.
There is little change to our 12-month target price, (login to view). Our new target is derived from a blend of DCF and EV/EBITA methods based on our updated estimates.
Our previous target was derived from a blend of DCF and EV/EBITA methods based on our pre-acquisition estimates, with a premium applied to take account of the value accretion from the acquisition.
We have assumed the acquisition completes on 30 June 2022.
We have based our growth and margin forecasts for PTEC on consensus estimates prior to the announcement of the deal.
We have assumed ALL’s planned exit of certain jurisdictions that do not meet its risk profile leads to the removal of A$100m in annualised EBITDA, which compares to guidance of €50-80m (A$77-123m).
We reiterate our ADD rating. In our opinion, the acquisition of PTEC gives ALL the opportunity to get to scale quickly in a market segment forecast to grow at a double-digit rate over the next five years.
We expect the strong sector growth to be driven by a North America market growing at a CAGR of close to 50% as more US states liberalise and allow online iGaming and online sports betting.
Primary risks are around the execution of the transaction and integration of the acquisition of PTEC.
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