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Date : 20/10/2021

Is This The Right Time To Buy Aristocrat Leisure Stocks On ASX?

Aristocrat Leisure (ASX: ALL) is an Australian gaming technology company. Aristocrat is licensed in around 300 gaming jurisdictions and operates in more than 90 countries. The business offers a range of products and solutions in the gaming space including pokie machines and casino management systems. Alongside gambling, Aristocrat also offers digital social games, with its Big Fish Games business being the world’s largest producer and distributor of free-to-play games.

The Aristocrat shares trading have been halted since the last two days after the company announced its $5 billion proposed acquisition of Playtech. In response, the London-traded gambling software company soared 56% in value. Aristocrat’s move to gain a foothold in the online gaming market makes it the company’s largest acquisition to date.

Whilst shares in the ASX-listed acquirer are still frozen today, let’s take a closer look at the proposed deal. Aristocrat Leisure has become a staple of the Australian share market over the years. For a while, the gaming machine manufacturer has operated a highly profitable business with a solid track record of growth.

Why Investors Are Closely Monitoring Aristocrat Leisure Stocks?

Although when restrictions and lockdowns swept across the world, Aristocrat was impacted by its reliance on in-person gaming. This was reflected in a short-lived weakness in the company’s share price. Meanwhile, online gaming companies charged forth through COVID-19 with many consumers turning to the online alternative.

As a result, Aristocrat is seeking to obtain its share of the US$70 billion online gaming segment via Playtech. If the deal goes through, Aristocrat will be armed with a broader range of solutions for its customers. This will cater to both physical and online gaming needs.

The price being paid for Playtech represents 11.4 times multiple on its adjusted EBITDA for the last financial year. Considering it’s the third time Aristocrat has kicked the tyres on Playtech, analysts are somewhat comforted it’s a reasonable amount.

Aristocrat can be a great opportunity given that Playtech acquisition offers the firm an open door to the fast-growing online real money gaming market. We believe this market is expected to grow at a CAGR of 13%. In fact, by 2025, the total addressable market is expected to reach US$11 billion.

As of today, Aristocrat shares are halted while the company raises capital for its acquisition. This involves a retail offer and an institutional offer. If all goes to plan, the institutional offer should be filled and closed by the end of the day. Subsequently, the Aristocrat share price should then resume trade on Thursday.

Finally, the retail portion of the capital raise will open on Monday next week. At the time of writing, the Aristocrat Leisure share price is frozen at $45.79 apiece. Aristocrat share prices have been pretty bullish since the beginning of this year. Year-to-date, Aristocrat shares appreciated by more than 47%.

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