Ainsworth Game Technology: A winning play

Poker machine maker racks up its tenth straight period of revenue growth

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 27, 2013 12:14 pm AEST

Poker machine maker Ainsworth Game Technology (ASX:AGI) has delivered a net profit after tax of $52.2 million for the 2013 financial year, racking up its tenth consecutive period of revenue growth.

Domestic revenue was up 21% over the previous year to $124.4 million, while international revenue rocketed up 55% to $73.7 million. Locally, a massive jump in revenues from within Victoria of 349% propelled the Australian result, as well as an acceleration of orders and deliveries in NSW and Queensland.

South American revenues rose 77%, and now contribute 26% of the total international revenue, whole the total machine install base across the Americas has increased by 56% to 1,156.

Ainsworth has declared a final dividend of 5 cents per share, bringing the total for the year to 8 cents per share, but has room to pay our more with its current 49% payout ratio.

Despite the splendid results, bottom line profit fell 19%, as Ainsworth was forced to pay tax for the first time, compared to a $18.1 million credit in the previous financial year. Still, the handy profit means Ainsworth has a net cash position of more than $40 million at the end of June, with virtually no debt.

Competitor, Aristocrat Leisure (ASX:ALL) is suffering locally, as Ainsworth increases market share in NSW clubs. Ainsworth's market share has risen from 13% a year ago, to 17% in July 2013, while Aristocrat has gone backwards from 48% to 45%. Ainsworth is also gaining market share in Queensland, although Aristocrat still maintains a dominant market share in both states.

Foolish takeaway

Ainsworth expects further growth in 2014, and has acquired 24 acres of vacant land in Las Vegas to continue its expansion in the US. The company is forecasting at least 15% growth for the first half of the 2014 financial year, over the previous period. Gaming companies can return nice dividends to shareholders. If Tabcorp (ASX:TAH) or Tatts Group (ASX:TTS) aren't to your fancy, you might want to add Ainsworth to your watchlist.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

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