Ainsworth Game Technology Limited (ASX:AGI) share price taken to the cleaners

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ASX:CBA

The Ainsworth Game Technology Limited (ASX:AGI) share price is taking an absolute hammering, plunging 57 cents or 29.4 per cent to $1.37 after the poker machine company slashed its second half profit estimates.

Ainsworth Game Technology had previously informed the stock market it expected second half FY 2018 profits to be modestly ahead of the $42.2 million in the second half in FY 2017.

Today the company announced it expected second half 2018 profits be be around $20 million, or less than half its previous guidance. For the full year FY 2018, Ainsworth expect profits to be around $36 million compared to $57.4 million in FY 2017.

Ainsworth says several short term factors have caused the shortfall.

Domestically these have included competitive environment, regulatory delays and product development changes which have deferred the approval and release of previously scheduled titles until the first half of FY 2019.

Internationally, Latin America sales are slightly lower, as are gross margins. In North America, sales are flat but increased royalty fees are impacting margins and profitability in the region.

CEO Danny Gladstone said, “We are clearly very disappointed by the rebasing of our profit expectations for 2HFY18. We operate in competitive markets and our execution this time has not met the high standards our shareholders correctly deserve. We are moving decisively to improve our profit outlook and are continuing to progress new product developments and marketing initiatives, which we confidently expect to improve our performance in FY19.”

After today’s fall, the Ainsworth share price has fallen 36.5 per cent so far in 2018.

Once a stock market darling, this continues the tough time Ainsworth shareholders have endured over the past few years. Back in early 2014 the Ainsworth share price traded above $4.50, a far cry from today’s $1.37.

ASX:AGI

By comparison, fellow poker machine company Aristocrat Leisure Limited (ASX:ALL) has been making every post a winner.

Over the past 5 years, the Aristocrat share price has jumped from $3.90 to $27.41. We recently named the company as one of our top 5 ASX blue chip shares for 2018 and beyond

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Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au