Week Ahead | Aristocrat Update

27 May 2019

Global markets were mixed on Friday, ​as hopeful comments from US President Donald Trump regarding trade relations with China assuaged concerns among some investors.​ ​Trump said complaints against China's Huawei Technologies might be resolved within the framework of a Sino-US trade deal​, but the US market (S&P 500) still experienced its 3rd straight week of declines​.

​For the week ahead, the local focus will be on the NZ government Budget 2019. 

Stock in Focus: Aristocrat (ALL:ASX)

​​​​​​​​​​​​​Aristocrat has had a strong start to 2019, surging ​+33​% year to date. We are very pleased with its latest result as we have maintained our positive o​u​tlook on the company even as it sold off late last year.

Aristocrats North American division was a standout​ for the 1st half as it achieved operating revenue of $2,150.3 million and normalised operating earnings of $644.4 million – an increase of 29.8% and 16.8%, respectively, on the prior corresponding period. The result was ​well ​ahead of ​market ​consensus​.

We continue to believe there is a massive opportunity for Aristocrat as it continues to expand into the digital gaming market, which is higher return and more akin to a SaaS (software as a service) business which should see Aristocrat trade at a higher valuation multiple over time.​

We currently have a BUY recommendation on Aristocrat.
Members should look out for a full update on Aristocrat to be released in our weekly report.

Australia & New Zealand Market Movers

​​​​​​​​​​​​​​​​​The Australian share market was in negative territory on Friday (ASX 200 index -0.55%) but still closed the week higher despite falling away from its post-federal election 11-year high as trade war concerns weighed on the market in the back end of the week. In stock news, TPG Telecom and Vodafone have filed a case with an Australian court challenging the competition regulator’s move to block their $15 billion merger. The price of oil continued to plunge, sending energy stocks into a tailspin.
The New Zealand market was lower on Friday (NZX 50 index -0.40%) led by Gentrack which was down -6%, after the utilities software developer was among companies reporting weaker than expected earnings. The share price of a lot of companies in the NZ market are now reflecting high expectations, especially technology stocks, making the room for error small.
Ryman Healthcare was lower as the country's biggest listed retirement village operator and developer posted a decline in annual profit as the value of its 36 villages rose at a smaller pace than a year earlier (on the back of a slowing property market). In saying that, it hiked its dividend payout after delivering another record operating earnings result and signalled more than $500 million of new development.

3 Things Markets Will be Watching this Week

  1. ​​​Mini reporting season across Australasia sees a number of Aussie & Kiwi stocks make earnings announcements this week.
  2. The latest ​US economic growth figures​ (GDP) are released on Friday morning (AU/NZ time).
  3. The ​NZ​ government​ budget ​is ​released​ on Thursday. 

Have a Great Day,


For the week ahead, the local focus will be on the NZ government Budget 2019. 

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