Aristocrat Leisure Limited manufactures and sells gaming machines in Australia and internationally. The Company also supplies gaming systems, software, table gaming equipment and other gaming related products and services to casinos, clubs and hotels.
ALL, a holding within the Value Strategy, reported its half-year results in a market down almost 2% and has fortunately provided a strong set of numbers that have helped push the stock up almost 3%. Despite falling from highs of just under $50.00 in October to yesterday’s close of $31.60, ALL reported an impressive normalised net profit after tax and before amortisation of $580m for the half ending 31 March, an increase of 41% on the previous corresponding period.
To put this result in context, the $580m is 37% ahead of its last pre-COVID first-half performance when the stock was trading near $40.00, so the stock is trading on a far lower earnings multiple than pre-COVID while still generating excellent profit growth. It’s also worth remembering that ALL raised $1.28bn for its acquisition of Playtech at a price of $41.85, with the deal falling over which, with the benefit of hindsight, has been a blessing given the timing of the planned acquisition. ALL has announced today that it will be returning $500m of that cash through an on-market buyback which begins on 2 June and that, at current market prices, ALL will effectively arbitrage over a quarter of a billion dollars on and, importantly, will retain significant balance sheet flexibility to pursue further strategic acquisitions.
ALL remains a high-quality company that is trading on the lowest earnings multiple for many years, and in our view is the sort of company we will look back in a few years and be shocked at how far the stock had fallen in this market shake-out. The future remains bright and ALL’s management team is top-notch, and the stock remains a hold as part of the Value Strategy.
