In Brief: Telcos, Gaming & Building Materials

Weekly Reports | 10:00 AM

Home grown focus on telcos offers respite from tariff turmoil, while analysts dig into trade impacts and cyclical challenges for gaming and building material companies.

-Trump tariffs shrink Canadian slot machine market
-Telcos take a bow
-Building materials, down but not out

Quote of the week comes from Tim Murray, Capital Markets Strategist, Multi-Asset Division at T. Rowe Price.

 "The growing skepticism about the U.S. earnings outlook stands in sharp contrast to an incrementally more positive environment for non-U.S. stocks, particularly in Europe. The potential combination of economic acceleration and a more supportive interest rate environment has been particularly encouraging for Europe's banking sector, which has been out of favor with investors for much of the past two decades."

Caught in tariffs crossfire

While markets have been shooting first (selling stocks) on tariff concerns, analysts will be increasingly looking into the weeds for those Australian companies with US exposure to determine what, if any, impacts might be forthcoming.

Jarden has conducted such an exercise into Light & Wonder ((LNW)) and Aristocrat Leisure ((ALL)), possibly not the two companies that would spring to mind with potential tariff impacts.

The broker emphasises tariffs can also result in a smaller addressable market via tariff retaliations and points to recent media reports. Canadian provinces, including Alberta's Gaming and Liquor Commission and Lotteries and Gaming Saskatchewan, are reported as halting the purchase of US slot machines that were due to be upgraded this year.

Canada is a "meaningful" market that has been historically dominated by US-domiciled International Game Technology with a 45% market share for slots. Light & Wonder and Aristocrat are underweight in the market with respective shares of 20% and 18%.

Jarden believes both ASX-listed companies can and will "work around" as per the covid experience, given their global reach and scale of diversification. Light & Wonder noted in its 4Q 2024 trading update the potential impact of "single millions of dollars." The stock remains Buy-rated with a $200 target price. Aristocrat carries a Hold-equivalent rating with a $67 target price.