Ainsworth Remains Undervalued Following First-Half Results

We lower our fair value estimate for shares in Ainsworth Game Technology to AUD 1.10, from AUD 1.14 previously, amid a lower near-term earnings forecast following the fiscal 2020 interim results. The net loss before tax of AUD 4 million was in line with guidance for the half, but included currency losses and one-off items relating to a legal settlement. Excluding one-off and currency impacts, the underlying net loss before tax was about AUD 0 million. The firm continues to expect to return to profit in the second half of fiscal 2020. Ainsworth enjoys competitive advantages in North America, with its licences underpinning the firm's narrow economic moat. While margins in the key North American market appear to be holding up, sales growth was softer than expected, with pressure on unit volumes and average selling prices. We lower our full-year net profit after tax, or NPAT, forecast to AUD 6 million for fiscal 2020, from AUD 8 million previously.