Aristocrat Leisure – 1H19 Earnings

Aristocrat Leisure reported a strong 1H19 result with the North American division the standout. The result also benefited from a lower AUD/USD exchange rate.  Normalised profit after tax $422  + 16% in reported terms and +7.7% in constant currency. Up from $361m the same time last year.

In FY20 we forecast revenue to grow by 8% and EPS growth at a similar level. Based on this, we have ALL on a  forward dividend yield of 2.2%.

Risks to the business include increased regulation, competition and slowing
customer demand. We look to buy ALL on the next Algo Engine buy signal.

The company goes ex-dividend $0.22 on the 29th of May.


Aristocrat Leisure – Counter Trend Move

Aristocrat Leisure is under Algo sell conditions following the lower high formation at $26. This is a favourite amongst local fund managers, with analyst price targets as high as $40.

The recent selloff has seen the PE fall from 30x back to a 17x PE. With the share price at $23, buying interest is now building and we may see a counter trend rally extend through to $24.50.
 – Technical Bounce

CAR is one of the “GARP” (growth at a reasonable price), names that we’ve been tracking.

With the stock bouncing off the $11.00 price level, we suggest running a tight stop-loss below the recent “pivot low” and giving the upside momentum a chance to develop.

Within the back drop of market volatility, it is difficult to know how this trade plays out in the short-term. Therefore, we highlight the need to run a stop loss.

We consider ALL & TWE as similar technical opportunities.

High Growth Names – Buying Momentum In ALL & TWE

Over the last three years, ALL & TWE have been among the best performing stocks within the ASX100 model portfolio.

Both names now reflect a “higher low” chart formation and Algo Engine buy signals.

TWE’s 20% sell-off post FY18 results provides an attractive entry point.  FY19 EPS growth is still likely to be in the range of 15 – 20%.

Star & Crown – Trading Update

Crown’s trading update was weaker than expected as main gaming floor revenue was down 0.6%.

Non-gaming revenue growth was 3.5%, while VIP turnover growth was up 13%.

Star Entertainment showed domestic revenue growth of +6.7% but VIP growth disappointed with it coming in flat on the prior period.

Crown looks like good “value” at $12 and is supported by a current ALGO Engine buy signal.

Aristocrat (ALL:ASX) is also looking well supported near the $26 range.


ALGO Update: Buy ALL & CWN

At $27.00, ALL is at about 17.5X estimated FY 2019 earnings.

In addition, given ALL’s exposure in the USA, a further fall in the AUD/USD will act as a tailwind for earnings going into next year.

ALL is part of our ASX Top 50 Model portfolio and we have an upside target of $40.50 over the medium-term.

The share price of CWN dipped to a 10-month low of $12.25 on Monday.

At the current level of $12.60, the stock is trading at less than 20X FY 2019 earnings for a partially franked yield of 4.5%.

Crown is included in our ASX Top 100 Model Portfolio.

Our near-term price target is just over $14.20, with a longer-term view to $15.75

Aristocrat Continues To Firm On Higher Earnings Estimates

Since testing a key support level at $27.00 last Friday, shares of ALL have rallied over 10% to hit a 1-month high of $29.60 in early trade today.

The stock has been supported by suggestions that next month’s full-year profit announcement  is likely to surprise to the upside by as much as 20% in the group’s social gambling business.

At $29.40, ALL is at about 19X estimated FY 2019 earnings. In addition, given ALL’s exposure in the USA, a further fall in the AUD/USD will act as a tailwind going into next year.

ALL is part of our ASX Top 50 Model portfolio and we have an upside target of $40.50 over the medium-term.



Quality On Sale – LLC, ASX, CSL & ALL (Video Link)

Lendlease, ASX, CSL and Aristocrat are names that we covered in Monday’s Opportunities in Review webinar.

Again, we draw your attention to these high quality businesses that have seen a recent correction in their share price.

We believe these names are close to finding support and should be the focus of establishing entry conditions. Watch the short-term momentum indicators for a reversal higher.

Click below to watch the short two minute video