We Remain Optimistic on Ainsworth's North American Prospects, Despite Australian Struggles

We retain our AUD 1.14 fair value estimate for shares in Ainsworth Game Technology following the firm's fiscal 2019 annual general meeting. The beginning of fiscal 2020 appears more troubled than we previously expected for the Australian business. Fiscal 2019 marked the fifth consecutive year of declining domestic unit volumes, and it appears fiscal 2020 will be another disappointing year. While we lower our near-term forecasts for the domestic business, we remain optimistic on the firm's North American prospects. Ainsworth enjoys competitive advantages in the key North American market, with its regulatory licences underpinning the firm's narrow economic moat. Our fair value estimate remains intact as the impact of the time value of money offsets near-term earnings reductions.