New tax plans from Donald Trump could help Australia’s largest pokie supplier boost its overseas bankroll according to financial analysts.
Following changes to the US tax code by president Trump, Aristocrat Leisure may soon see its North American profits improve by 9 percent. The forecast by investment bankers at Citi and Morgan Stanley are based on two primary factors: lower corporate rates and great consumer spending power.
Less Tax Equals More Profit
In the first instance, the pokie developer’s earnings could improve thanks to a drop in the corporate tax rate. Under Trump’s new system, businesses will have to pay a levy of 21 percent instead of the previous rate of 35 percent.
With Aristocrat deriving 70 percent of its revenue from the US market, lower taxation will naturally increase its profit margin. Looking specifically at the numbers, analysts at Morgan Stanley have calculated that the company’s earnings could improve by 9 percent per share by the end of the decade.
Indirectly, Aristocrat may also benefit from an increase in gambling activity across the US. With the personal tax rate dropping from 39.6 percent to 37 percent, financial experts believe that those with more disposable income will choose to spend it on activities such as gambling.
If that proves to be the case, Aristocrat could be in line for an upturn in both the amount spent and the number of players spending money on its games. In fact, the pokie provider’s recent takeover of Big Fish Games could prove highly lucrative if consumer spending moves in the direction analysts are predicting.
US Assets to Pay Dividends
As it stands, US-based Big Fish Games has a userbase of 12.4 million. Should interest in gambling increase, Aristocrat would be able to use its industry experience to bring new elements to the social gaming market and, potentially, encourage more people to play.
Based on Trump’s tax policies and the changes they may affect on the US population, Citi bankers have revised their earnings per share forecast by 11 percent.
“We believe that reductions to personal tax rates in the US … across various income brackets could also bode well for [Aristocrat’s] North America segment,” explained Citi analyst Rohan Sundram.
As well as improving Aristocrat’s fortunes, greater spending power by US businesses and residents alike could help the Aussie gaming economy. Increased levels of corporate investment both at home and in North America could create new opportunities, while tourism may also provide a revenue boost for timely Australia’s live casinos.