AGI 2.50% 39.0¢ ainsworth game technology limited

technical, page-2

  1. jem
    90 Posts.
    re: technical + fundamental Deutsche Bank has issued an in-depth research report on the gaming industry in Russia, a market
    the broker sees as providing future upside for both Aristocrat (ALL) and Australia’s other participant,
    Ainsworth Game Technology (AGI).

    The broker anticipates this could double to US$9bn by 2007, in part because Russia has enjoyed
    and should continue to enjoy strong economic growth. On Deutsche Bank’s numbers Russian GDP
    grew at 7.3% in 2004, a result higher than Australia, the US and Hong Kong, while the next few
    years are forecast to show average GDP growth of 4.5-5% annually.
    One impact of this growth has been an increase in living standards, which has also meant higher
    disposable incomes for the general population.
    The broker notes the nature of the Russian economy is particularly suited to gambling in that it is
    basically a cash society where the average Russian prefers to spend on luxuries and entertainment
    rather than saving for the future, which helps support the broker’s optimistic view for continued
    growth in the industry.
    Despite the increase in size in recent years the industry remains very small in comparison to more
    mature gaming markets, with returns not yet approaching the levels achieved in more developed
    markets, as seen in the ‘Win/day’ numbers for operators.
    On the broker’s calculations the win per machine per day returns for Russian operators are low
    compared to the US – about US$75 in casinos and US$40 in arcades compared to Atlantic City’s
    $230 and Las Vegas’s $175, but this is likely to increase as the Russian economy continues to
    expand.
    To some extent this growth is already being realised, as the number of gaming machines nationally
    has increased from 12,000 in the late 1990s to about 240,000 currently.
    The broker expects expansion to continue, forecasting an increase to about 550,000 total machines
    by 2007, which is a compound annual growth rate of 30%.
    Interestingly, it seems the Russians are more attracted to gaming machines than table games,
    as the broker notes there are only about 1,000 gaming tables in the country and these tend to be
    located in the larger casinos rather than in the arcade venues that dominate the industry, especially
    outside the major cities of Moscow and St Petersburg.
    On 2004 numbers slot machines generated 67% of total industry revenue, but the broker expects
    this share to increase to about 75% of total revenue by 2007.
    This would equate to slot machine revenue of about US$7-$7.5bn, up from US$3bn last year,
 
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