Aristocrat Leisure: Knight of the roundtable

About the author:

Alexander Mees
Author name:
By Alexander Mees
Job title:
Co-Head of Research and Senior Analyst
Date posted:
27 March 2023, 9:00 AM
Sectors Covered:
Gaming and Retail

  • At a virtual roundtable, Aristocrat Leisure (ASX:ALL) reiterated its expectation of positive NPATA growth in FY23, weighted to the second half. It indicated that land-based gaming continues to experience ‘strong’ growth in the Americas, though ANZ is ‘subdued’. Mobile games development underpins a ‘resilient’ performance by Pixel United, despite the contraction of the market.
  • Ahead of the interim results on 18 May, we have increased our EPS forecasts by 1% in FY23 and 2% in FY24, driven by the recent buyback extension. ADD.


Aristocrat Leisure (ALL) hosted a virtual roundtable ahead of its 1H23 result in May.

Guidance for positive growth in FY23 reiterated

ALL continues to expect positive growth in net profit before amortisation of acquired intangibles (NPATA) in FY23. As it stated at the AGM in February, it expects growth to be ‘skewed to the second half of the year’. Our estimates are consistent with this.

We forecast NPATA growth of 6.4% in 1H23, supported by the strength of the US dollar. For the full year, we forecast NPAT growth of 13.2% (consensus 14.0%).

Gaming continues to perform well in the Americas, though ANZ is ‘subdued’

Land-based gaming in the Americas has been the powerhouse of ALL’s earnings since COVID. It continues to lead the way, with shipments running ‘strong’ and game performance ranked well.

Though it is ‘monitoring’ consumer sentiment, ALL is upbeat about the prospects for casino visitation, notably at tribal locations and in Las Vegas, where room rates are at record highs. The ANZ business has been ‘subdued’ in the run-up to the NSW election this weekend.

ALL is getting in front of the possible introduction of cashless gaming in NSW with trials extended to a further 140 EGMs in the state. Greater clarity about the political landscape in NSW after the election will be helpful.

Pixel United ‘resilient’

Growth in the digital gaming market has moderated significantly since COVID. ALL reports that the performance of its digital business, Pixel United (PxU), has been ‘resilient’ in light of the weakness in 2H22.

Given the comps are more challenging in the first half, though, we forecast a 2% decline in constant currency revenue in PxU in 1H23. Game development continues at pace despite the disruption from the war in Ukraine and Merge Gardens was released successfully in October.

PxU aims to release 3-5 titles in any given two-year period. IDFA has created challenges for CPI (cost per install), which PxU is looking to mitigate through greater use of endorsements by celebrities like footballer Neymar (now a character in Mech Arena) and wrestler Ronda Rousey (appearing in RAID: Shadow Legends).

Anaxi has signed another partnership deal

ALL’s nascent online real money gaming (RMG) division, Anaxi, has completed the acquisition of Roxor Gaming and signed a number of content partnerships with US gaming businesses including BetMGM and Caesars.

It announced yesterday it has now signed with Penn Entertainment and will soon launch a tribal offer with the Chickasaw Nation in Oklahoma.

Changes to earnings estimates

We have updated our model to account for the recently-announced $500m extension to the buyback program, as well as FX variations and minor changes to assumptions around growth in Gaming and PxU.

Our EPSA estimates rise by 1.3% in FY23 and 1.9% in FY24. Ahead of the interim results on 18 May, we forecast 1H23 EBITA of $869m, up 3.0% (consensus $879m) and NPATA of $617m, up 6.4% (consensus $626m).

Investment case and risks

We're optimistic about ALL's long-term growth potential, given its superior capitalisation and strong ability to invest in the development of its land-based and digital gaming businesses. Additionally, ALL has a high cash conversion rate and ROCE, despite running a capital-light model.

Additionally, ALL has ample funding for investment in online RMG, even following the recent buyback extension.

Risks include adverse FX rate fluctuations, loss of market share in land-based and digital gaming, disruption to new game development, escalating operating costs, and potential political risks associated with the NSW election.

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