Aristocrat Leisure Set To Soar With Proposed Acquisition Of Playtech

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Aristocrat Leisure Set To Soar With Proposed Acquisition Of Playtech

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  • FY21 Earnings Before Interest Tax, Depreciation, and Amortisation (EBITDA) of A $1.54 billion
  • FY21 Net Profit After Tax and Amortisation (NPATA) of $864 million
  • Currently trading at A $47.44, up 50.4 per cent over the year

Since producing its first ever gaming machine in 1953, Aristocrat Leisure Limited has had its sights set on providing the world’s leading markets with innovative video gaming solutions. Considering where it stands today, with a notable presence in Australia, South Africa, Russian, and the United States, its global presence easily places it among the world’s largest gambling machine manufacturers.

Though it has seen certain successes with its land-based gaming machine segment, Aristocrat continues to provide innovative solutions with its development of digital gaming services. As part of its global strategy to upscale its capabilities within the Real Money Gaming (RMG) market segment, the company has lately focused on an acquisition offer of Playtech PLC. The acquisition, announced at the start of last week, will prime Aristocrat to respond to growing market demand for online RMG and mobile gaming products. This strategy to expand its global capabilities effectively sees the company growing its total addressable market to over US $300 billion.

While its existing land-based gaming market commands just over US $150 billion, Aristocrat expects to bolster this amount by a further US $70 billion, by entering into the online RMG segment. Primarily, Aristocrat’s strategic entry into the online gaming market is driven by its analysis of expected demand from US players. A key figure that drives its forward momentum lies with the company’s assessment of the online RMG segment in North America reaching US $19.6 billion in 2025, at a continued annual growth rate of 48 per cent.

Playtech Acquisition Set to Boost Aristocrat Earnings for FY21

Aristocrat’s 100 per cent acquisition of Playtech has been proposed for a cash offer price at 680 pence per share. The offer is based on an approximation of Playtech’s share capital at £2.1 billion, or A $3.9 billion. With the acquisition expected for completion in the second quarter of 2022, Aristocrat anticipates Playtech to contribute noticeable mid-term revenue and earnings growth to its existing performance — especially with its key ability to provide in-demand business to business technology as a global gaming platform.

Together with its announcement of the Playtech acquisition offer, Aristocrat additionally provided shareholders with a trading update for its unaudited FY21 results. With FY21 NPATA at $864 million, the company sees an implied 81 per cent growth from FY20. It attributes its performance for the year to a number of market factors, including enhanced gaming operations activity, and bookings by users up 14 per cent for digital segments, and 25 per cent among daily active user bookings.

In total, the company’s unaudited FY21 EBITDA stands at A $1.54 billion, with A $4.73 billion in revenue earned for the year. However, another noteworthy feature of its FY21 performance lies with its strong operational cash flow, with balance at A $2.4 billion. This figure holds significance, especially as Aristocrat seeks to continue developing its growth strategy to meet rising demand domestically in Australia, as well as in the US. At the time of writing, Aristocrat’s share price is trading at an impressive 50.4 per cent higher over the past year.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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