Poker machine manufacturer, Ainsworth Game Technology (ASX: AGI) says it expects to report a profit for the six months to December 31, up a whopping 40% over the previous corresponding period.
CEO Danny Gladstone says continued growth in revenues and profits is expected in the 2014 financial year and beyond. Ainsworth reported a 32% jump in revenue in 2013 to $198 million, its tenth consecutive year of growing revenues. Chairman Len Ainsworth also noted that research and development spend was 12% of revenues in 2013, allowing the company to expand its library of Premium Plus recurring revenue games targeted at international markets.
Ainsworth says that a suite of games will be launched online later this month. Both Trump Plaza and Golden Nugget Casinos are launching their websites on November 26 with Ainsworth game content. The company has already launched its games into both the UK and Italian markets.
A key priority for Ainsworth is the development of desktop and mobile game applications during 2014. The company is also looking at expanding its business-to-business (B2B) distribution channels by signing content supply agreements with European industry operators.
Ainsworth is gaining market share from its major competitor, Aristocrat Leisure (ASX: AGI), locally, and appears to be eating into the market share of the major poker machine and gaming producers around the world, most notably in the United States. Of course, Len Ainsworth had a long history at Aristocrat, before leaving and starting up Ainsworth Game Technology, so he has plenty of insider knowledge of how his main rival operates.
And it seems in Australia both companies could do very well, with the Queensland government keen to see more casinos opened in the state. James Packer's Crown Resorts (ASX: CWN) and Hong Kong billionaire Tony Fung's Aquis are both interested in developing new casinos in the state. Echo Entertainment (ASX: EGP) already operates three casinos there, but more could be on the way.
Foolish takeaway
Trading on a trailing P/E ratio of 27 times, Ainsworth may not look cheap, but if it can keep generating growth of 40% in revenues, today's price might look cheap in five to ten years' time. Foolish investors may want to add Ainsworth to their watchlist.
