Ainsworth's Fortunes Are Tied to Customers' Capital Expenditure Cycles

We maintain our AUD 0.38 fair value estimate for shares in no-moat Ainsworth Game Technology following the firm's annual general meeting and release of first-half guidance. Ainsworth expects a pretax loss of AUD 15 million in the first half of fiscal 2021--in line with our full-year forecast of a AUD 29 million pretax loss. Ainsworth's outright electronic gaming machine, or EGM, sales have been hard-hit as coronavirus-induced shutdowns, social distancing measures, and travel restrictions weigh on the firm's casino and club customers. While the vast majority of North American casinos have now reopened, travel restrictions and social distancing measures mean visitations remain well below prepandemic levels, and we expect curtailed capital expenditures to persist through fiscal 2021.