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

We expect Ainsworth will be unable to recapture lost share as the firm struggles to compete against the financial might of much larger competitors--namely International Game Technology, Scientific Games, and narrow-moat Aristocrat Leisure. In our view, Ainsworth has squandered the opportunity afforded by its licences across key regions, with underinvestment in research and development, or R&D, in recent years leading to a lack of popular games today. While the firm has flagged a renewed focus on R&D spending in an attempt to stem market share losses, we expect this will prove too little, too late. Ainsworth is working from a much smaller revenue base, and the three major competitors all spend more on R&D than Ainsworth's entire annual sales. Consequently, Ainsworth's recent product releases have been lacklustre in comparison.