Aristocrat may have acquisition opportunities: JPM

Aristocrat Entertainment is likely to emerge from the current crisis with a larger land-based footprint in the medium-term and may be well placed to expand through acquisitions of weaker rivals, JP Morgan said in a note.

The company is likely to weather the current Covid-19 storm relatively well, given the strong performance it is seeing in online operations in both Australia and Italy, the firm said. 

Aristocrat is likely to see a decline of 24.8 percent in 2020 earnings due to lower sales and fees from gaming operations, but is likely to snap back to see an increase of 38.5 percent in EBITA in 2021, the note said.

The firm is being helped by an increase in average digital play time of about 134 percent in Italy as workers are forced to stay at home under the lockdown imposed by the government. In Australia, that figure is up by 74 percent.

“More active players are more likely to invest in ALL’s (Aristocrat’s) titles, supporting bookings (we expect digital EBITA growth of +15.4 percent in FY20).”

The supplier is seen as being in a strong position to take advantage of acquisition opportunities, as it has a low debt to EBITDA ratio of 1.4 times and a strong liquidity of $718.6 million. That compares with a ratio of 6.4 for SG and 4.3 for IGT.