SHARES in Aristocrat Leisure hit a
16-month high yesterday following news that California may remove
limits on the number of
poker
machines allowed in some of its casinos.
US newspapers reported overnight that Governor Arnold Schwarzenegger
was close to sealing a deal with casinos run by four Indian tribes
that would remove the current limit in California of 2000
poker
machines per venue.
In return, the
tribes would pay the state $US1 billion ($1.45 billion) between them
and another $US250 million every year.
The news quickly
sent shares in Aristocrat up 22c, or 4.8 per cent, to $4.78, their
highest price since January 2003.
However, the
stock was unable to sustain the momentum and profit-taking in the
afternoon session trimmed gains. Aristocrat shares closed just 3c
higher at $4.59 in a generally weaker market.
"Representation
from Aristocrat is very light in the US, so it would broaden their
market," said Ausbil Dexia head of equities Paul Xiradis. "They have
some very good-quality machines that do lend themselves to
participating in the US, so this could prove to be quite good for
Aristocrat."
The stock has
now risen as much as 187 per cent since the start of the year, when
it sank as low as $1.66.
"The stock has
been very strong and you can't read too much into the
profit-taking," Mr Xiradis said.
"If things
settle in the market in the next few days, it could move higher
again," he said.
CommSec analyst
Derek Francis said Aristocrat only had about 5 per cent of the
existing slot machine market in the US.
"But we estimate
they capture about 18 per cent of new opportunities, because their
product is technically superior," he said.
Aristocrat's
North American division contributed only $8.2 million to net profit
in 2003, but Goldman Sachs JB Were estimates the division will
contribute $42 million this year.
It was the
latest in a series of good news breaks for Aristocrat, which last
month forecast a first-half net profit of up to $60 million, well in
excess of market expectations and a sharp turnaround from the
first-half loss of $32.9 million a year earlier.
The
company has also forecast increased
poker
machine sales in Japan, and in March secured product approvals in
New Jersey, Mississippi and Nevada, three of the largest states for
gaming in the US.
The stock is now
back above its level of February 2003, when it plummeted in the wake
of news that poor US performance and the loss of a key Colombian
contract had led to a shortfall in 2002 net profit.
