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Australia (ASX) & New Zealand (NZX) Market Movers – 28th May – Stock in Focus: Aristocrat (ASX: ALL)

Australia and New Zealand Market Movers is provided by: Australasian Trading Management.

The Australian share market was in negative territory on Friday (ASX 200 index -0.07%), ending the week down close to -1%. The market was weighed down by Telstra shares which hit a seven-year low during the week. A retracement in the price of oil on Friday saw companies such as BHP Billiton and Woodside Petroleum give back some of their recent gains on Friday.

The New Zealand market was higher on Friday (NZX 50 index +0.55%) as Comvita and A2 Milk recovered from selling, while Air New Zealand and Steel & Tube Holdings fell. In stock news, shares in Spark New Zealand were higher as it said It expects annual earnings to fall by as much as 2.5% this year as it brings forward restructuring costs and accelerates its ‘Quantum Programme’ to transform the company into the operator with the lowest costs. Spark anticipates operating earnings of between $971 million and $991 million in the year ending June 30 as it doubles this year’s restructuring costs to $50 million-to-$55 million.

Global markets were mixed on Friday after a steep drop in oil prices pressured energy stocks, but losses were limited by gains in chipmakers and retail stocks.

Russia and Saudi Arabia signalled over the weekend that they may boost oil output to slow the rise in prices, prompting oil to plunge with investors taking profits across the energy sector.

For the week ahead, geopolitics will remain a focus for investors.President Trump takes the spotlight again given there is uncertainty around the status of trade talks with Canada and Mexico, and more importantly the status of trade talks with China. There is also Trump’s auto tariff threat. In addition, there have been conflicting messages as to whether Trump will attend the June 12 meeting with North Korea’s Kim Jong Un.

There is also important US economic data released at the end of the week – which will be watched closely by the US Federal Reserve ahead of its interest rate decision next month.

Stock in Focus: Aristocrat (ALL:ASX)

While the broader Australian market was lower last week, shares in gaming technology company Aristocrat (ALL) have surged to all-time higher after announcing last week its digital social gaming revenue helped drive a +35% jump in half year profit.

Looking at some of the details, the bumper profit result smashed investor expectations reporting normalised net profit after tax of $310.5 million on revenues of $1,640.9 million (an increase of 24.4% and 33.6%, respectively on the prior period). Strong growth in ALL’s Americas business was impressive, however the main driver of growth the digital business, which we have highlighted as a massive opportunity (the larger digital gaming market is a US$43.6 billion industry). Recent acquisitions in the sector, Plarium and Big Fish which were completed in the period boosted ALL’s numbers.

We have a positive view on ALL as the business transitions into the digital space and transforms its business to a more profitable recurring revenue model (in a similar manner to a “software as a service” company).

3 Things Markets Will be Watching this Week

1.  Geopolitics will likely remain a focus for investors – with trade talks between the US & China, and the between the US, Canada, and Mexico continuing.

2. The Reserve Bank of New Zealand releases its latest financial stability report on Wednesday.

3.  Important US inflation data and monthly employment figures are published at the end of the week.

Australia and New Zealand Market Movers is provided by Australasian Trading Management. ATM is an independent research house covering stock analysis across major markets including the ASX, NZX and US markets. We make our research easy to understand and concise, taking complex issues and simplifying them so that you can make informed and accurate decisions. We have no conflicts of interest and our only goal is to generate positive returns for our members. We run transparent model portfolios to track performance and invest where we see the most value, in companies of all sizes across all industries, and often in smaller companies.

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Categories: Australian Stocks, New Zealand Stocks

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