Moody’s upgrades Aristocrat outlook to Positive on COVID recovery and online gaming investments

Moody’s Ratings has upgraded the outlook for global gaming supplier Aristocrat Leisure Ltd from Stable to Positive, citing the company’s strong recovery post-COVID and its recent moves into the online Real Money Gaming sector.

It has also affirmed Aristocrat’s Ba1 corporate family rating (CFR) and the Ba1 backed senior secured first lien term loan B rating of subsidiary Aristocrat Technologies, Inc.

In a Wednesday note, Moody’s said the revised outlook reflects the expectation that Aristocrat will “continue to maintain strong credit metrics for its rating level and excellent liquidity.

“Positive earnings momentum will likely continue to support its low leverage, driven by a strong recovery in its gaming operations following the pandemic and growth in its real money gaming (RMG) business.”

The expansion into RMG, the ratings agency added, could increase its growth spending and potential for further acquisitions.

Specifically, the recent acquisition of NeoGames S.A. “improves its business profile with increased scale and geographic diversification and adds new complementary growth channels through its RMG segment,” Moody’s said. “Moody’s expect that following the integration of existing acquisitions, Aristocrat may continue to explore inorganic opportunities, particularly in RMG, however given ample balance sheet capacity, Moody’s expects the company to maintain credit metrics appropriate for the rating.”

Leverage is expected to remain around 1.0x to 1.1x even with such potential acquisitions on the horizon, bolstered by an “excellent liquidity profile” that includes around AU$2.6 billion (US$1.7 billion) in cash and equivalents available plus another US$500 million available under its revolving credit facility.

A US$1.2 billion term loan facility and the US$500 million senior secured revolver won’t mature until 2027.

Aristocrat’s internal liquidity sources, including its strong operating cash flows, will likely be adequate to cover its shareholder returns, capital expenditure and design and development expenditure over the next 12 months,” Moody’s said.

It added that the affirmation of Aristocrat’s Ba1 rating reflects its “strong market presence and distribution across a diversified geographical footprint, as well as its history of developing products that remain popular among consumers. Its credit profile also reflects the high proportion of recurring revenue in its premium gaming operations and digital businesses, which supports earnings stability.”

As reported by IAG, Aristocrat generated a revenue of AU$3.27 billion (US$2.19 billion) and EBITDA of AU$1.20 billion (US$804 million) in the six months ended 31 March 2024.