The gaming machine producer Aristocrat Leisure Limited (ASX: ALL) has been turning on the juice over the past year, with its stock up about 32%. Compared with the 0.8% decline of the S&P/ASX 200 Index (ASX: XJO) (Index: ^XJO), it's clearly on a strong upward trend.
Investors will want to know what is driving the business and how growth in the gaming and casino industry both in Asia and the US can propel it even further.
Here are three catalysts in play right now that are making Aristocrat a promising investment.
Expanding into the North American gambling market
Already the market leader in gaming machines for casinos and entertainment centres in Australia and the Asia-Pacific region, Aristocrat Leisure wants to expand its footprint even more in the USA.
It currently gets more than half of its revenue from the Americas, but there is still more room to grow there. Aristocrat's latest games have been winning over many players.
Game themes based on hit TV shows like "The Walking Dead" have been hugely successful. What also helps company revenues is that in the US the gaming machine vendors can enter game revenue sharing agreements with casinos for the best money-making games.
The company's FY 2014 interim results for North America had a 4.6% earnings gain with a remarkable 38% profit margin.
New acquisitions increasing cash flows
Aristocrat has made several acquisitions of US companies over the past two years. It has just completed one for slot machine maker Video Gaming Technologies. The company's CEO and managing director Jamie Odell said: "VGT brings a complementary product offering to Aristocrat and will immediately step change our scale and significantly accelerate our growth, in the critical US recurring revenue segment."
The acquisition will more than triple its North American machine numbers, adding 28,400 slot machines to its current 8,200. The acquisition's expected extra free cash flows will help fund further acquisitions.
Online gaming showing great success
Likewise, online gaming through social media sites like Facebook has paid off after buying online game producer Product Madness in late 2012. Its Heart of Vegas game has been named one of Facebook's top 10 games of 2013.
These are for social gaming, not for direct gambling. However, players can pay for features and game extras. Should US laws change to allow online gambling, Aristocrat would be well positioned to take advantage of the opportunity.
