Aristocrat Leisure

Aristocrat Leisure has now switched to Algo Engine sell conditions and has been removed from our ASX 100 model portfolio.

Aristocrat delivered 1H20 net profit, (NPATA), of A$368mn which was down 13% on the same time last year. Growth in digital earnings was not enough to offset weak revenue in the Americas.

We’re not willing to look at shorting ALL as we see a normalization of the business conditions by 2022, we’ll revisit this name should we see a “buy on the dip” opportunity later this year.

Aristocrat Leisure – 1H19 Earnings

Aristocrat Leisure reported a strong 1H19 result with the North American division the standout. The result also benefited from a lower AUD/USD exchange rate.  Normalised profit after tax $422  + 16% in reported terms and +7.7% in constant currency. Up from $361m the same time last year.

In FY20 we forecast revenue to grow by 8% and EPS growth at a similar level. Based on this, we have ALL on a  forward dividend yield of 2.2%.

Risks to the business include increased regulation, competition and slowing
customer demand. We look to buy ALL on the next Algo Engine buy signal.

The company goes ex-dividend $0.22 on the 29th of May.

 

Caresales.com – Technical Bounce

CAR is one of the “GARP” (growth at a reasonable price), names that we’ve been tracking.

With the stock bouncing off the $11.00 price level, we suggest running a tight stop-loss below the recent “pivot low” and giving the upside momentum a chance to develop.

Within the back drop of market volatility, it is difficult to know how this trade plays out in the short-term. Therefore, we highlight the need to run a stop loss.

We consider ALL & TWE as similar technical opportunities.

Carsales.com

Star & Crown – Trading Update

Crown’s trading update was weaker than expected as main gaming floor revenue was down 0.6%.

Non-gaming revenue growth was 3.5%, while VIP turnover growth was up 13%.

Star Entertainment showed domestic revenue growth of +6.7% but VIP growth disappointed with it coming in flat on the prior period.

Crown looks like good “value” at $12 and is supported by a current ALGO Engine buy signal.

Aristocrat (ALL:ASX) is also looking well supported near the $26 range.

 

ALGO Update: Buy ALL & CWN

At $27.00, ALL is at about 17.5X estimated FY 2019 earnings.

In addition, given ALL’s exposure in the USA, a further fall in the AUD/USD will act as a tailwind for earnings going into next year.

ALL is part of our ASX Top 50 Model portfolio and we have an upside target of $40.50 over the medium-term.

The share price of CWN dipped to a 10-month low of $12.25 on Monday.

At the current level of $12.60, the stock is trading at less than 20X FY 2019 earnings for a partially franked yield of 4.5%.

Crown is included in our ASX Top 100 Model Portfolio.

Our near-term price target is just over $14.20, with a longer-term view to $15.75