Aristocrat Leisure
Recommendation
Shares in Aristocrat Leisure have jumped 6% after the manufacturer of poker machines reported a strong interim result. Overall earnings before interest and tax (EBIT) slipped 1.2% in the six months to March, but excluding the volatile Japanese region (which saw only one game released in the period compared to two a year earlier) EBIT was up 12% in constant currency terms.
Highlights included a strong performance from the US business and an increase in the company’s dividend payout ratio to between 60% and 80% of normalised net profit after tax, compared to 50-70% previously. The result is a seven cent interim dividend, more than the six cents the company paid out for the whole of 2012. The main lowlight was weakness in Australia, which chief executive Jamie Odell described as ‘absolutely our most competitive market’.
Guidance is for a similar net profit in the second half as in the seasonally stronger first half, which would mean an increase of about 15% for the full year.
The stock is now up 76% since we upgraded to Long Term Buy less than a year ago on 2 Jul 12 (Long Term Buy –$2.45), and has risen 34% since we moved to Hold on 7 Dec 12 (Hold – $3.21). Keep an eye out for a full review in coming days. In the meantime, we’re happy with HOLD.
Note: Our Growth Portfolio owns shares in Aristocrat Leisure.