Australia | Nov 03 2006
By Chris Shaw
Any mention of Macau in recent weeks has been focused on Publishing & Broadcasting (PBL) and its deals to expand its gaming interests and exposure to Asia’s Las Vegas.
As Deutsche Bank notes PBL is not the only company likely to benefit from an expansion in the available gaming facilities as Aristocrat Leisure (ALL) is a major supplier of gaming machines to the region, having around 50% of the machine market currently.
This leads the broker to suggest there is some upside to the company’s earnings numbers, as apart from the new facilities being built major players such as Las Vegas Sands have announced expansion plans that will see a significant increase in the group’s total number of tables and machines.
Both “The Venetian Macau” and the “Four Seasons Resort” are being expanded and along with new casinos yet to begin construction should see the group have total capacity in the region of around 2,000 tables and 16,000 slots. This compares to the broker’s current forecasts of 1,425 tables and 6,000 slots, so the upside is significant.
The potential benefits for Aristocrat are also significant, as the broker notes if the company can maintain its market share at around the 50% level it would add 3-4% to earnings annually through to FY09. Thomson One Analytics notes median earnings per share estimates for the company are currently 68c in 2007, 80c in 2008 and 92c in 2009.
As a result the broker has retained its Buy rating, though the current share price is now approaching the broker’s target price of $14.50. The FN Arena database shows Aristocrat is rated as Buy four times, Hold four times and Underperform once, with an average price target of $14.20. This compares to the median price target according to Thomson One of $14.00.
Aristocrat shares are stronger in early trading, as at 11.00am the stock was up 43c or 3% to $14.90, near its high for the past year of $15.13.