May 24: Aristocrat home on the range +More

Aristocrat H1, Reef Casino FY, AGS analyst update, Catena Bond update

May 24, 2021

Welcome to another week from E+M. This morning we have the latest from Aristocrat which reported very impressive figures overnight UK time. There is also news from Australian casino minnow (apologies) Reef Casino Trust. A quick reminder that on Wednesday we will be reporting on what was said by Gamenet/Lottomatica on Tuesday afternoon.

Aristocrat

The top line

Revenue for the six months to March fell 1% to A$2.23bn but on a constant currency basis it rose 11%. EBITDA rose 6% to A$750.3m with EBITDA margin rising 230bps to 33.7%. Net profit after tax (NPAT) rose 18.4% to A$362.2m

Revenues derived from gaming represented 46% of total group revenue while digital revenue stood at 54%. In gaming, 78% of revenue came from the Americas, 20% ANZ and 2% ROW. For digital, 49% of revenue came from social casino, 34% from strategy and RPG and 17% from social casino gaming.

At March end 93% of class II install base was operational and around 80% of the class III install base.

Net debt decreased by 40% to A$1.33bn with the net debt/EBITDA ratio shrinking to 1.2x. Liquidity at the end of March was over A$2bn.

Buffalo wings: Gaming revenue fell 14.2%, however in local currency it rose 2%. The fee per day across the total install base rose 8.9% to A$54.69. CEO Trevor Croker noted that 17 of the top 25 games on the Eilers & Krejcik premium title list were Aristocrat titles, which Croker said demonstrated the group’s “exceptional portfolio strength.” Croker also noted the release of Buffalo Link in the US in the last fortnight, which he said was the most anticipated game in the industry. The game was developed in conjunction with HRG Studios.

I can see for miles: While Croker noted that many of the company’s operator clients “aren’t necessarily into releasing capital for games right now”, he was still hopeful for the rest of this year. “We’re still confident that we will see an install base increase,” Croker added. “Good quality games will drive foot traffic and we think we will benefit from that.” On iGaming in the US, Croker said the company continues to monitor the market. “The growth in digital is phenomenal and we believe there is a lot of growth there and in the gaming business.

We’re well-positioned and the key is to continue to grow the core businesses and iGaming is just one of those adjacencies that we continue to monitor and I should say it is still very early in its lifecycle in the US.”

Merge mania: Revenues for digital rose to US$899m (all digital revenues in USD), up 28.9%. Croker noted that consumer demand for digital games remained undimmed and “elevated” on pre-Covid levels, albeit moderated slightly on company's second half 2020. Among the highlights is the growth of EverMerge, which brought in US$136m in H1. DAU numbers decreased 8.2% on the prior year period, but revenue per active user rose to US$0.72 from US$0.50. “You’re seeing some growth rates moderating,” Croker told the analysts. Talking about EverMerge, Mike Lang, CEO of digital, said the game was “by far the most successful launch we have had with Big Fish since we bought the company.”

AGS analyst update

After meetings with management, the analyst team at Truist have upgraded their target on AGS, suggesting the company has three pillars for growth this year. One is further growth in the premium games install base (due to the launch of the Starwall product), second is improvements in the the KPIs while the market remains strong; and third is a continuation of the efforts to “prune” lower-yielding units. This latter move has led to over 1,300 machines being removed from the market.

Capex bounceback: Truist reported AGS management as saying that operators have resumed allocating funds towards capex, “though it’s unclear when (they will) return to 2019 levels.” “Management also discussed perceptions around operators shrinking their gaming floors due to Covid,” they added.

“While some floor reductions are possible in the near-term as a result of COVID; they see less an issue longer-term. Ultimately, AGS believes operators will invest in their floors, especially with their focus moving back towards gaming vs. non-gaming.”

Catena bond

Debt redux plans: As mentioned in E+M’s coverage of Catena Media’s Q1 results, the group has started on its “significant debt reduction journey” with the announcement this morning that it would raise €40-€50m. The bonds are set to mature over the next three years. The group has invited existing bondholders to sell their bonds at a price equal to 103.25% of the outstanding nominal amount, subject to subscribing for the new bonds.

CEO Michael Daly commented: “The refinancing is a step forward for the company. It will improve our financial structure by providing increased flexibility and a prudent maturity profile, while honouring the commitments of current bondholders.”

Newslines

Surfing the wave: Queensland casino Reef Casino Trust’s 2020 numbers showed the extent of the issues it faced during the year following Covid-related closures. Net losses came in at A$209,000 after a strong trading performance in the second half almost made up for decimated H1 trading. The casino was shut for 55% of 2020. In the first-half the casino produced a loss of A$23.7m while in H2 it showed a profit of A$23.5m.

Vacc for good: Melco Resorts will be paying staff MOP1,000 ($125) to get the jab and once the company’s immunity targets are hit, up to six employees will win MOP1m each. Lawrence Ho, chairman and CEO of Melco Resorts & Entertainment, said: “The health and safety of Melco colleagues, guests and community is a top priority.”