Shutdowns Weigh on Aristocrat's Pokies Business, but Digital Gaming Performs Strongly

We lower our fair value estimate for narrow-moat rated Aristocrat Leisure by 2% to AUD 27 per share following the release of first-half fiscal 2020 results. Electronic gaming machine, or EGM, sales have been particularly hard-hit by coronavirus-induced shutdowns of most of the firm's customers. Sales volumes were weaker than our prior expectations, despite shutdowns coming into effect at the tail end of the period. We anticipate Aristocrat's customers may have been slowing capital expenditure prior to shutdowns, and we lower our full-year fiscal 2020 forecasts accordingly. Nevertheless, the digital business continues to perform strongly, and in our view, Aristocrat remains in a good position to bounce back when capital expenditure begins to flow again. Since recovering from March lows, shares in Aristocrat are beginning to screen as fairly valued.