Why do you like Aristocrat?

“At Medallion, while facing tough conditions in the current climate, we continue to be encouraged by the prospects for Aristocrat, which has a portfolio of very highly-regarded electronic gaming machines in an industry with significant barriers to entry,” Michael said.

An area where Aristocrat has invested very heavily in recent years is the diversification away from physical gaming machines and into the online and mobile gaming markets. Is this correct?

“Yes. Off the back of this success and rapid growth, the digital business has been transformed in recent times, underpinned by the acquisitions of Plarium for US$500 million, in the social gaming space and Big Fish in the social casino and social gaming space for US$990 million,” he added.

So these acquisitions were strategically good?

“The market opportunity in these areas is of particular interest, with the social casino market estimated at $4.5 billion, and the social gaming market estimated at $45.9 billion. The increase in scale is key to capturing a large portion of this market which has high levels of recurring revenue and strong margins,” Michael said.

And have casino revenues proved resilient during tough times?

“So far in 2020, casino revenues have proven more resilient than expected, which is supportive of the medium-term outlook for the company. While unit sales for the company are estimated to be down -60% – 70% year on year, this is actually better than expected.

“For the first nine months of FY20, ALL appears to be demonstrating its resilient qualities with all aspects of the business progressing ahead of restated COVID expectations. As it stands social casino revenue is up 26% while social casual is up 36% rounding off gains in market share, both in land-based games and in the digital space,” Michael added.

And what are the expectations post Covid?

While land-based gaming revenues fell 6%, we’d expect this side of the business to bounce back quickly post-COVID, while the mobile gaming side of the business should continue to pick up the slack in the meantime. When looking at the long-term picture, it appears that COVID has actually provided Aristocrat with the ability to take market share from smaller competitors who have quickly become more focused on staying afloat than driving business growth,” Michael concluded.

Source: Google

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.