Digital growing at c.35% in the December quarterUBS Evidence Lab...

Digital growing at c.35% in the December quarter
UBS Evidence Lab social gaming ( > Access Dataset) and social casino ( > Access Dataset) data indicates that Aristocrat's digital business grew at ~35% over the December quarter. The social gaming business grew by more than 40% y/y over the period, with Evermerge gaining share for the 3rd consecutive month. On the social casino side, growth was also solid at ~30% y/y. In terms of momentum, the December month was solid at +35-40% for Aristocrat's combined digital business.


Expectations for digital growth moving forward
We expect the March quarter to moderate slightly, before Aristocrat comps the positive impact of lockdowns (from April). This note contains data looking at how the year could play out for digital growth. Assuming stable market share and flat industry volumes; 1H21 would show ~30% growth y/y and 2H21 will be broadly flat y/y (in line with our forecasts).


Still #1 on land based performance
Eilers-Fantini game performance data shows that Aristocrat has 4 of the top 5 premium cabinets, and 2 of the top 5 non-premium. New slots have also outperformed, with "Buffalo Chief" the best performing new core box. Aristocrat has maintained the #1 spot in premium revenue contribution at 41%. Despite strict capacity restrictions, we have not heard of material closures across the US and continue to forecast that 80-90% of Aristocrat's machines are switched on.contribution at 41%.

Valuation: $35.50 per share (previously $38.80)Our EPS forecasts decline 8-9% as we move to spot currency of 77c. Our price target is based on an unchanged 22x FY22E EPS, in line with the Industrials ex financials, healthcare and tech. We highlight a 47% underperformance of Aristocrat versus digital peers over the past 12 months as an area of interest at the moment.