Ainsworth Game Technology confronts earnings headwinds, despite an agreed deal with Austria's Novomatic, according to Macquarie analysts.
Macquarie has downgraded Ainsworth to "underperform" from an "outperform" rating and set a target price of $2.10.
"Absent current unresolved corporate activity, we see risks for AGI (Ainsworth) firmly skewed to the downside," the research said. Billionaire pokies king Len Ainsworth agreed in February to sell his 53 per cent stake in the company he founded to Novomatic.
The 92-year-old gaming veteran will retain his role as chairman, with Novomatic saying it expects to keep its stake in the company at about 53 per cent and retain Ainsworth's ASX listing.
The transaction, which requires shareholder approval at an extraordinary meeting, doesn't go far enough to sway the view of Macquarie analysts who upgraded their rating of rival Aristocrat to "outperform."
"In direct contrast with ALL (Aristocrat), AGI lags in both patent and market share measures and while to some this may be a signal to buy, the trough is yet to be realised in our view," the analysts said, referring to measures such as market share in new pokies across NSW and Queensland.
"On both a PE and EV/EBITDA basis, AGI is trading well below average levels, however this is for good reason in our view and with the overhang of the Novamatic deal, AGI is not a stock that we would be owning at present."
AGI Price at posting:
$2.27 Sentiment: Hold Disclosure: Held
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