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ASX:LNW
Light & Wonder Inc. CDI
Investment Summary
The fund managers believe that Light & Wonder Inc. (LNW) presents a strong investment opportunity due to its position as a global leader in cross-platform gaming and its impressive financial performance. They underscore the importance of strategic moves such as divesting non-core assets and focusing on digital growth, which have reinforced the company's balance sheet. In their opinion, the growth outlook remains promising, particularly with anticipated market share gains in North America and the introduction of engaging new content in Australia. Despite encountering legal challenges, notably from Aristocrat Leisure, managers express confidence in the company's fundamentals and long-term prospects, citing an ability to maintain earnings growth and a solid operational foundation. Overall, they regard LNW as a core holding that aligns well with their investment strategies, noting its potential for continued double-digit EPS growth supported by a robust product pipeline and strong market dynamics.
Commentary From The Managers
Cooper Investors
31 Mar 2025
$139.87
- Positive feedback on Light & Wonder’s acquisition of Grover Charitable Gaming
- Robust industry structure with unique market offering and recurring revenue base
- Long-standing customer relationships support sustainably high margins of 80-85%
- Potential to enhance offerings by rolling out proprietary content
- Opportunities in higher-margin direct-to-consumer distribution in the digital sector
- Organic growth trends in iGaming, though new state openings have been slower than expected
- Long-term potential for legalisation of an estimated US$500bn unregulated grey market in gross gaming revenue
- This combination of factors is expected to drive a strong multi-year growth narrative
Endeavor Asset Management
31 Mar 2025
$139.87
- Light & Wonder (LNW) declined by 20.7% in March.
- The decline resulted from the overall stock market sentiment and negative news related to legal proceedings with competitor Aristocrat Leisure (ALL).
- Endeavor Asset Management believes that the legal proceedings will create noise but will not fundamentally affect the business in the long term.
- Looking ahead, Endeavor Asset Management is looking forward to updated financial guidance and a 3-year business plan to be presented at the upcoming investor day in May.
Bennelong Long Short Equity Fund
31 Mar 2025
$139.87
- Bennelong Long Short Equity Fund continues to update its investment thesis on Light & Wonder Inc.
- Recent developments include Aristocrat launching legal action against Light & Wonder for alleged trade secret infringement
- The legal action involves only a limited number of games, suggesting minimal impact on LNW earnings
- This could indicate a sense of frustration from Aristocrat, aiming to impede Light & Wonder's growth
- Light & Wonder is capturing a significant market share across various games, independent of this case
- Bennelong Long Short Equity Fund remains confident in Light & Wonder's position in the market
Ten Cap
28 Feb 2025
$176.27
- Light & Wonder (LNW) experienced a robust month
- Legal risks are receding
- Earnings guidance has been reaffirmed
- Potential for a listing change driving strong re-rating
- LNW is trading at a significant discount to Aristocrat (ALL)
- LNW is exhibiting faster growth
- Ten Cap continues to view LNW's prospects favourably
- Increased LNW position ahead of its results
- Medium-term earnings guidance diminished risks
- The company shows strong fundamentals and attractive growth prospects
Endeavor Asset Management
28 Feb 2025
$176.27
- Light & Wonder (LNW) reported a strong February result with NPATA of $127 million, outperforming consensus by 5%
- Operational improvements and 853 premium leased machines added to its fleet contributed to performance
- The share price increased by 22.6% due to strong earnings and a positive outlook
- LNW announced plans to explore a dual ASX listing or primary ASX listing
- This potential listing may help narrow the 7x P/E valuation gap with Aristocrat (ALL)
- Endeavor Asset Management continues to view LNW as a core holding in the Endeavor Growth Equities Portfolio
- The investment philosophy is rooted in quality investments
Clime
28 Feb 2025
$176.27
- LNW delivered a strong contribution throughout February
- 4Q24 results exceeded expectations
- Proposed acquisition of Grover Gaming
- Management reiterated AEBITDA guidance for 2025
- Acquisition expected to be earnings accretive from day one
- Positive outlook with effective management execution on strategy
- Clime continues to hold due to these robust factors
L1 Capital
28 Feb 2025
$176.27
- Light & Wonder shares have rallied +23% following solid Q4 FY24 results.
- FY25 guidance reaffirmed for $1.4b EBITDA.
- Announcement of an earnings accretive acquisition of Grover Gaming.
- Favourable court ruling in Australia allows the Dragon Train game to remain in venues.
- This ruling denied Aristocrat Leisure’s request for an injunction.
- Strong earnings momentum observed across land-based gaming, SciPlay, and iGaming segments.
- L1 Capital believes this positions the company for double-digit EPS growth p.a. over the medium term.
Endeavor Asset Management
30 Nov 2024
$145.70
- Endeavor Asset Management has added LNW to its portfolio.
- Light & Wonder Inc. is a global leader in cross platform games and entertainment.
- The company specializes in innovative game content, technology, and systems for various gaming markets.
- Strong financial performance is evidenced by impressive machine sales across all regions.
- Strategic divestment of non-core assets has strengthened the company's balance sheet.
- Management's confidence in achieving FY25 financial targets highlights potential for growth.
- 14% growth in Adjusted EBITDA is anticipated, driven by gaming operations.
- Market share gains are expected in North America and sales leadership potential in Australia.
- Endeavor Asset Management believes Light & Wonder offers compelling value and aligns with our investment strategy focused on quality growth opportunities.
- The company's robust product pipeline and strategic positioning in key markets will support future expansion.
Blackwattle Investment Partners
30 Sept 2024
$132.63
- LNW was the largest negative contributor to performance during the month, falling 18% in September.
- LNW received a "preliminary injunction" from the US District Court of Nevada, halting the commercialization of the new Dragon Train franchise globally.
- LNW is a global, cross-platform gaming company, one of three dominant players with Aristocrat and IGT.
- LNW is dual listed in the US, having listed on the ASX in mid-2023.
- LNW has been a core part of the portfolio since inception.
- Blackwattle Investment Partners recognizes significant upside potential from improving business quality due to LNW’s focus on reinvesting in content creation.
- The preliminary injunction may lead to losing the full court case to Aristocrat, which is disappointing.
- LNW is more than just the Dragon Train franchise, with the game generating less than 5% of earnings.
- Damages from the injunction are unlikely to be material, likely less than 1% of LNW’s market cap.
- The market reaction appears excessive but reasonable given the short-term uncertainty.
- This setback is viewed as a short-term opportunity within a multi-year improving quality narrative for LNW.
- LNW has a strong pipeline of new content, continuing to support strong and improving financial metrics.
Blackwattle Investment Partners
30 Sept 2024
$132.63
- Light and Wonder (LNW, -17.6%) announced an injunction on Dragon Train, a key growth driver due to legal claims on trade secret misappropriation by Aristocrat.
- Legal action revealed a former employee's actions involving the theft of a math model used to develop Dragon Train.
- Despite the setback, LNW reiterated guidance of $1.4bn in adjusted EBITDA for 2025, with 5% previously expected from Dragon Train.
- LNW remains a top slot machine game provider in the US with a broad library of alternatives for customers impacted by Dragon Train's issues.
- No immediate customer removal of Dragon Train units suggests potential willingness to switch to different LNW game software.
- Blackwattle Investment Partners remains constructive on LNW and believes that short-term challenges will not impact long-term prospects.
- The gaming industry exhibits strong cash flows and a stable customer base which may offer defensive revenue streams.
Blackwattle Investment Partners
30 June 2024
$156.00
- LNW was the largest positive contributor to performance during the month.
- LNW rose 12% in June, on a delayed move from a strong 1Q24 result in May together with strong game performance in recent months from industry data.
- LNW is a global, cross-platform gaming company, and is one of three dominant players (with Aristocrat and IGT).
- LNW is dual listed in the US, having listed on the ASX mid-2023.
- LNW has been a core part of the portfolio since inception.
- Blackwattle Investment Partners recognized significant upside potential from improving business quality.
- LNW has been a turnaround story since 2020, with a new board led by former Aristocrat executives driving a simplification strategy.
- The board brought in new management (majority ex-Aristocrat), orchestrated asset sales, and implemented cost reductions leading to material de-gearing.
- With improved incentive structures, the business has attracted leading creative talent and added significant investment to design studios.
- LNW is beginning to realize the benefit of these changes, with exciting and popular new game titles capturing material market share.
- Blackwattle Investment Partners continues to see significant upside for LNW, as the reinvestment flywheel and scaling of the business continue to deliver strong and improving financial metrics.
Blackwattle Investment Partners
28 Feb 2024
$154.94
- Light & Wonder delivered a strong 4Q23 result, indicating ongoing momentum towards its medium-term EBITDA target.
- Current consensus expectations are lower than the target, allowing for potential earnings upgrades.
- The positive result was driven by market share gains and an improvement in revenue yield.
- Blackwattle Investment Partners anticipates continued growth with the upcoming release of Dragon Train, the top-performing game in Australia, expected in the North American market in the March quarter.
Milford Asset Management
28 Feb 2024
$154.94
- Light & Wonder Inc. experienced a strong earnings increase of 20.0%.
- The company is well positioned for growth with various opportunities, including game adjacencies.
- There is a significant rollout of premium content in iGaming.
- Milford Asset Management views Light & Wonder as a unique global growth investment opportunity.
- The firm perceives a strong medium-term growth profile for the company.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
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