Playing the stock market can be a lot like playing the pokies. Anything can happen. A little luck could make you rich, while a little misfortune could syphon your bankroll. But the stars may be aligning between the two as many analysts are suggesting pokies marker Ainsworth Game Technology (ASX: AGI) to be a top buy for value seekers.
In the last year, Ainsworth’s top rival, Aristocrat Leisure Limited (ASX: ALL) has gotten all the glory from investment brokers, and not without good reason. Over the last 12 months, ALL has seen its stocks soar 44%, while AGI fell 22%.
Those who previously invested in Aristocrat are surely patting themselves on the back right now, but for anyone looking to buy in early 2016, its rival pokies maker, Ainsworth, could present a much better opportunity for profit.
In 2015, AGI exceeded a value of 3.20 on three occasions, reaching 3.22 in May, 3.25 in August and 3.21 in November. Since that final peak was reached, the stock has steadily dropped, reaching 2.05 on Wednesday – its lowest value in almost four years. Shares rebounded to 2.07 at time of writing.
Interestingly enough, that figure closely mimics Ainsworth’s stock performance last year, when it dipped as low as 2.13 in late December 2014. A month later, its value had skyrocketed back to the 2.75-2.95 range.
If history repeats itself, value seekers who snag shares in AGI now could be looking at a lofty return. But again, playing stocks and playing poker machines are analogous, and there’s always the risk that AGI won’t recover anytime soon, just like a progressive jackpot may not strike for years to come.
However, the pokies maker has made some interesting moves lately that could translate to an increase in revenue and share value over the 2016 fiscal year.
Sun Rising on Ainsworth in 2016?
In November, Ainsworth Game Technology moved forward with an unsurprising move to purchase fellow gaming manufacturer, Nova Technologies.
Based in the United States, Nova Tech is a privately-held Class II pokies maker that supplies its products to a horde of Native American owned (tribal) casinos. Such gambling establishments are not legally permitted to install traditional, Class III poker machines (or slot machines, as Americans call them). Instead, Nova focuses on Class II varieties that look and feel like real pokies, but still fall into the gameplay and payout requirements of Class II devices.
Over the last decade, Nova has produced over 30 variations of Class II slots, distributing about 1,300 machines to tribal casinos across the country.
The USD $38 million (AUD $45 million) acquisition has propelled Ainsworth’s North American presence, doubling their number of installed poker machines in the region to 2,600.
Ainsworth’s FY 2015 revenue report showed $70 million in profit, up from $62 million in the previous year.
AGI Projected to Outperform Market
The latest consensus on AGI from stock analysts on FT.com showed 4 of 7 experts putting AGI in the “Outperform” bracket. The other votes were all split, 1 for Buy, 1 for Hold and 1 for Underperform. The previous consensus from a month ago showed an overwhelming favour for investors to ‘Hold’ position.