ebetet COMPANY NOTE period. We estimate that CARDIT EBITDA will grow by 17% yoy in FY15.

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1 Gaming Australia ebetet EBT AU / EBT.AX Current A$4.00 Market Cap Avg Daily Turnover Free Float Target A$4.57 US$60.43m US$0.11m 70.0% Prev. Target A$ A$70.48m A$0.12m m shares Up/Downside 14.3% Important: The recommendation has been made on a 12 month view and may not suit you investment needs or timeframe. The basis it is prepared on is summarised on the last page of this report. PLEASE CONTACT YOUR ADVISER TO DISCUSS THIS GENERAL RECOMMENDATION BEFORE ACTING ON IT Morgans Financial Limited (A.B.N ) AFSL A Participant of ASX Group Sourced from CIMB Securities (Australia) Limited ( CSAL ) ABN AFS Licence number ETB Show Style "View Doc Map" Contents BACKGROUND... 5 OUTLOOK... 8 RISKS FINANCIALS VALUATION AND RECOMMENDATION Coming to a club near you ebet offers investors unique exposure to the clubs and pubs slot machine market in Australia. The company provides value-added systems to allow venues to better understand their customers, optimise their offering accordingly and drive performance. We expect strong growth over the forecast period driven by new markets opening (Victoria) and increased market penetration in NSW and QLD. We expect FY15 to be a strong year for ebet with EPS of 23c (+21% yoy), rising to 30c in FY16 and 32c in FY17. In addition, we expect the balance sheet to enter a net cash position of A$5.3m, improving to A$6.3m in FY16 and A$7.4m in FY17. We initiate coverage of ebet with an Add recommendation and a A$4.57 target target price (DCF-based) offering c.14% upside from current levels. CARDIT key to success CARDIT is one of ebet s core growth drivers, in our view. It is a player-based card system for gaming machines that allows customers to transfer credits and cash without waiting for attendants. This increases both the number of gaming sessions and length of sessions for customers, and according to ebet boosts gaming venues revenue per customer by around 18%. In addition, it is far more cost effective (lower labour and hardware costs) than the leading alternative product of Ticket In Ticket Out (TITO). The product is underpenetrated in ebet s core market of NSW and we expect this to drive performance over the forecast Conviction COMPANY NOTE period. We estimate that CARDIT EBITDA will grow by 17% yoy in FY15. Land grab in Victoria Regulation changes in Victoria are prompting venues to adopt systems to enhance their understanding of the performance of their gaming offering. We estimate that the addressable market for ebet is around 7.5k EGMs and the company s potential market share may reach 70% based on recent momentum. Undemanding rating With resilient earnings growth, strong cash generation and a balance sheet in a net cash position, which we expect to improve over the forecast period, we believe an FY15 PE rating of 17.5x (falling to 13.4x in FY16) is undemanding. This is further compounded by the potential for M&A activity, given the recent activity in the sector. We believe the current share price offers an attractive entry point and initiate coverage with an Add recommendation and a A$4.57 target price. Vol th Price Close Relative to S&P/ASX 200 (RHS) Nov-13 Feb-14 Jun-14 Sep-14 Source: Bloomberg 52-week share price range Current Target Financial Summary Jun-14A Jun-15F Jun-16F Jun-17F Revenue (A$m) Operating EBITDA (A$m) Net Profit (A$m) Normalised EPS (A$) Normalised EPS Growth 0.0% 20.6% 30.0% 7.9% FD Normalised P/E (x) DPS (A$) Dividend Yield 1.38% 1.72% 2.23% 2.41% EV/EBITDA (x) P/FCFE (x) NA NA Net Gearing 0.1% (19.8%) (20.8%) (21.4%) P/BV (x) ROE 15.8% 18.3% 17.4% % Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x) SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS CAN BE FOUND AT THE END OF THIS DOCUMENT.

2 PEER COMPARISON Research Coverage Bloomberg Code Market Recommendation Mkt Cap US$m Price Target Price Upside ebet #NAME? AU ADD #NAME? #NAME? 4.57 #NAME? Rolling P/BV (x) 12-month Forward Rolling FD P/E (x) Jan-11 Jan-12 Jan-13 Jan-14 Jan Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 ebet ebet Peer Aggregate: P/BV vs ROE Peer Aggregate: 12-mth Fwd FD P/E vs FD EPS Growth % % % 17.75% 17.38% 17.00% 16.63% 16.25% 15.88% % 23.3% 20.0% 16.7% 13.3% 10.0% 6.7% 3.3% Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan % 0.0 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan % Rolling P/BV (x) (lhs) ROE (See Footnote) (rhs) 12-mth Fwd FD P/E (x) (See Footnote) (lhs) FD EPS Growth (See Footnote) (rhs) Valuation FD P/E (x) (See Footnote) P/BV (x) EV/EBITDA (x) Dec-14 Dec-15 Dec-16 Dec-14 Dec-15 Dec-16 Dec-14 Dec-15 Dec-16 ebet Growth and Returns FD EPS Growth (See Footnote) ROE (See Footnote) Dividend Yield Dec-14 Dec-15 Dec-16 Dec-14 Dec-15 Dec-16 Dec-14 Dec-15 Dec-16 ebet NA 25.6% 17.8% 17.1% 17.9% 1.55% 1.97% 2.33% SOURCE: CIMB, COMPANY REPORTS Calculations are performed using EFA Monthly Interpolated Annualisation and Aggregation algorithms to December year ends. NPAT/EPS values for calculations and valuations are based on recurring and normalised values for GAAP and IFRS accounting standard companies respectively. 2

3 BY THE NUMBERS Share price info P/BV vs ROE Share px perf. (%) 1M 3M 12M % Relative Absolute % Major shareholders % held % Perpetual Limited % IOOF Holdings % Commonwealth Bank of Australia % Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan mth Fwd FD Normalised P/E vs FD 20.0 Normalised EPS Growth Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan % 31.5% 28.0% 24.5% 21.0% 17.5% 14.0% 10.5% 7.0% 3.5% 0.0% Rolling P/BV (x) (lhs) ROE (See Footnote) (rhs) 12-mth Fwd Rolling FD Normalised P/E (x) (lhs) Diluted Normalised EPS Growth (rhs) Profit & Loss Strong profit uplift led by acquisitions (A$m) Jun-14A Jun-15F Jun-16F Jun-17F Total Net Revenues Gross Profit Operating EBITDA Depreciation And Amortisation (3.98) (4.69) (4.02) (4.22) Operating EBIT Financial Income/(Expense) (0.13) Pretax Income/(Loss) from Assoc Non-Operating Income/(Expense) Profit Before Tax (pre-ei) Exceptional Items Pre-tax Profit Taxation (0.72) (1.00) (1.31) (1.42) Exceptional Income - post-tax Profit After Tax Minority Interests Preferred Dividends FX Gain/(Loss) - post tax Other Adjustments - post-tax Preference Dividends (Australia) Net Profit Normalised Net Profit Fully Diluted Normalised Profit Cash Flow Positive cash generation (A$m) Jun-14A Jun-15F Jun-16F Jun-17F EBITDA Cash Flow from Invt. & Assoc. Change In Working Capital (3.71) 0.89 (0.62) (0.82) (Incr)/Decr in Total Provisions Other Non-Cash (Income)/Expense Other Operating Cashflow (0.84) Net Interest (Paid)/Received Tax Paid 0.00 (1.00) (1.31) (1.42) Cashflow From Operations Capex (2.66) (7.03) (6.02) (6.33) Disposals Of FAs/subsidiaries Acq. Of Subsidiaries/investments (0.36) (4.00) Other Investing Cashflow Cash Flow From Investing (3.02) (11.03) (6.02) (6.33) Debt Raised/(repaid) (1.29) Proceeds From Issue Of Shares Shares Repurchased Dividends Paid (0.54) (1.20) (1.57) (1.70) Preferred Dividends Other Financing Cashflow Cash Flow From Financing (1.82) 6.80 (1.57) (1.70) Total Cash Generated (1.22) Free Cashflow To Equity (0.68) (1.46) Free Cashflow To Firm 0.60 (1.46) SOURCE: CIMB RESEARCH, COMPANY DATA

4 BY THE NUMBERS Balance Sheet (A$m) Jun-14A Jun-15F Jun-16F Jun-17F Total Cash And Equivalents Total Debtors Inventories Total Other Current Assets Total Current Assets Fixed Assets Total Investments Intangible Assets Total Other Non-Current Assets Total Non-current Assets Short-term Debt Current Portion of Long-Term Debt Total Creditors Other Current Liabilities Total Current Liabilities Total Long-term Debt Hybrid Debt - Debt Component Total Other Non-Current Liabilities Total Non-current Liabilities Total Provisions Total Liabilities Shareholders' Equity Minority Interests Total Equity Key Ratios Jun-14A Jun-15F Jun-16F Jun-17F Revenue Growth 0.0% 17.3% 6.1% 7.3% Operating EBITDA Growth 0.0% 24.4% 7.6% 6.8% Operating EBITDA Margin 19.0% 20.1% 20.4% 20.3% Net Cash Per Share (A$) (0.00) BVPS (A$) Gross Interest Cover N/A N/A N/A N/A Effective Tax Rate 19.7% 20.0% 20.0% 20.0% Net Dividend Payout Ratio 29.0% 30.0% 30.0% 30.0% Accounts Receivables Days Inventory Days Accounts Payables Days ROIC (%) 11.5% 15.1% 21.1% 20.5% ROCE (%) N/A 18.8% 22.9% 21.8% SOURCE: CIMB RESEARCH, COMPANY DATA

5 Coming to a club near you INVESTMENT VIEW AND RECOMMENDATION We initiate coverage of ebet with an Add rating and a A$4.57 target price implying 14% upside to current levels. ebet offers investors an opportunity to gain exposure to the resilient club and pub gaming machine market in Australia through its suite of value-added software products designed to improve venue yield per player. We see two significant opportunities for ebet, which are: 1. CARDIT the company s cash card for gaming machines, which improves revenue per customer by around 18% pa (according to ebet), and is cheaper than the alternative Ticket In Ticket Out (TITO) offering. The product is underpenetrated in ebet s core market of NSW and we expect this to drive performance over the forecast period. 2. Victorian market opening Regulation changes in Victoria are prompting venues to adopt systems to enhance their understanding of the performance of their gaming offering. We estimate the addressable market for ebet is around 7.5k EGMs and the company s potential market share may reach c.70%, based on recent momentum. As a result of these two opportunities and recent acquisitions, we expect FY15 to be a strong year for ebet with EPS of 23c (+21% yoy), rising to 30c in FY16 and 32c in FY17. In addition, we see strong cash generation from here despite strong investment in capex and improving dividend payout ratios. We expect the group to generate strong cash flow over the forecast period and to enter a net cash position of A$5.3m in FY15, rising to A$6.3m in FY16 and A$7.4m in FY17. As ebet has no comparable listed competitors, we have opted to employ a DCF valuation methodology to value the company. Our model generates a target price of A$4.57. We initiate coverage with an Add rating. Key risks in our view include: 1) a significant change in competitive landscape; 2) increased regulation on EGMs; and 3) EGMs losing share of gambling wallet. However, as discussed in this report we feel that the chances of these risks coming to fruition are limited. BACKGROUND From licensed hardware to proprietary software ebet was listed on the S&P/ASX in 1999 at a time when the company focused primarily on selling gaming machines into the pub and club market in Australia. As it stands today, the business is very different from that which first entered the market 15 years ago, and we would not be surprised if it were to change its name. Over the past 15 years ebet has been involved in almost all aspects of the Australian gambling market, from selling gaming machines to running an online gaming company. However, the company has exited these business over the last number of years to focus on increasing the scale and sophistication of its value-added services to gaming machine venues in Australia. Today ebet is a leading IT service provider to clubs and pubs throughout Australia. Its proprietary technology allows clubs to: monitor customer activity in all areas (gaming, F&B, parking etc), provide payment systems, and benchmark performance within the industry. These tools equip venues with vital information to improve customer experience and ultimately revenues.

6 Figure 1: ebet listed in 1999 Figure 2: ebet today is focused on value-added systems SOURCE: ebet SOURCE: ebet ebet divisional overview Gaming systems Gaming systems is the entry point for most of ebet s customers. It is the division in which ebet records all revenue associated with outright sales. Essentially revenue is derived in three ways: system sales to new venues; system upgrades to existing venues; and the introduction of new functionality into venues. Like all technology platforms, ebet has a base system (called Metropolis) with entry level functionality, which: monitors floor activity; runs performance reports; manages the membership database; and manages cash and promotional activity. Figure 3: Elements of base Metropolis Product Suite Figure 4: An example of floor status for a venue SOURCE: ebet SOURCE: ebet ebet differentiates its offering via its add-on products, which include the following: CARDIT essentially a dedicated cash card for venues gaming machines, eliminating the need for cash; Engage a loyalty program;

7 TITO Ticket In Ticket Out which replaces cash with paper tickets; and VNU Apps venue apps for mobile phones, which incorporates a membership card, loyalty program and payments. Of these add-on products, CARDIT is the key driver of Metropolis sales. Simply put, CARDIT is a debit card onto which customers deposit cash in order to play gaming machines (it works on all types of gaming machines). It is replacing cash and TITO (Ticket In Ticket Out) as it is more secure for customers (less risk of losing/misplacing the tickets/cash) and cheaper for venues to operate (c.18% cheaper than TITO, according to ebet). Figure 5: CARDIT increases daily turnover for clubs Figure 6: CARDIT drives reinvestment SOURCE: ebet SOURCE: ebet The most recent addition to this division was the acquisition of FlexiNET in July The FlexiNET system offers an alternative TITO solution enabling all gaming machines to operate a form of TITO rewritable tickets. We see limited growth in the business and expect the EBITDA contribution to remain at c.a$1.4m pa. The key benefit we see from this business is that it increases the potential for sales of Metropolis systems as an add-on service. Figure 7: CARDIT varieties SOURCE: ebet Gaming operations Gaming operations encompasses the revenue associated with ongoing service contracts arising from system sales recorded in gaming systems. The business is a mixture of: Monitoring - Every state in Australia has a LMO (Licenced Monitoring Operator), which is responsible for reporting game activity to the state government for tax purposes. ebet is a LMO (along with Maxgaming) in Queensland with 30% market share (in terms of number of EGMs serviced). This is a low-margin business relative to that of Metropolis and CARDIT servicing, which we see as the major driver of revenue and margins. Gaming machine maintenance and replacement.

8 Software support and licensing This business segment is driven by Metropolis and CARDIT sales. Figure 8: ebet EGM network SOURCE: ebet Gaming machines The gaming machine business has changed significantly in recent years. ebet used to have an exclusivity agreement with WMS to market, distribute and promote its games in Australia. However, as WMS failed to gain traction in the Australian market, the agreement has been scaled back to logistics and distribution only. We expect this business will phase out over coming years. Business intelligence The business intelligence division was established in March 2014 when ebet acquired CDOL (which has been rebranded as Astute). Astute provides business intelligence tools to clubs and hotels assisting them to optimise operations through the storing, analysing and reporting of internal financial, gaming, membership and marketing data. It also provides venues the ability to benchmark their performance against current industry data from over 45,000 gaming machines in over 680 venues. This business is focused on clubs and pubs, as well as the major gaming machine manufacturers to whom the company has indicated it will market bespoke reports that can be used in marketing materials to venues. OUTLOOK Key driver 1: CARDIT CARDIT is one of ebet s key drivers. Venues are attracted to CARDIT due to the combination of lower installation costs, lower maintenance costs and increased revenue impact. In order to have CARDIT, venues must also purchase the Metropolis system, which drives both the gaming systems and gaming operations. Selling points of CARDIT: No hardware (printer) like in TITO. No paper costs. Increases number of gaming sessions. Increases length of gaming sessions. Increases gaming revenue by 18% on average according to ebet. We believe CARDIT offers the most considerable upside potential of ebet s products. CARDIT is only in its second year and we see multiple legs of growth from the following:

9 1) Existing ebet venues adopting the system penetration rates in NSW increased from 29% in FY13 to 35% in FY14 and we expect this to rise to 43% in FY15 (led by a recent contract signed with Redcape) before reaching 48% in FY16 and 51% in FY17. Penetration rates in Queensland were only 21% in FY14, which we expect to reach 30% by FY17. We note that this is conservative relative to our NSW expectations, as we believe it will be more challenging to convert customers in QLD, given club sizes are considerably smaller than in NSW. 2) The Victorian market has recently deregulated to allow multiple systems providers. Under the new regulations clubs must have signed with a provider by the end of December We estimate ebet s addressable market is 7.5k EGMs and that it could secure 70% of the addressable market, driving gaming systems and gaming operations performance for CARDIT and Metropolis. 3) New venues switching from TITO to CARDIT. Given the value proposition of CARDIT, we believe there are growth opportunities from new customers. However, in the near term, we believe increasing penetration rates and securing market share in Victoria are a priority. Figure 9: CARDIT Gaming Operations FY14 FY15F FY16F FY17F NSW No. of ebet EGMS 31,990 35,000 37,800 41,580 CARDIT EGMS 11,163 15,000 18,144 21,206 NSW CARDIT Penetration 35% 43% 48% 51% Gaming Systems EBITDA (A$m's) Gaming Operations EBITDA (A$m's) NSW CARDIT EBITDA (A$m's) QLD No. of ebet EGMS 16,938 17,446 18,318 19,234 CARDIT EGMS 3,502 4,187 4,946 5,770 QLD CARDIT Penetration 21% 24% 27% 30% Gaming Systems EBITDA (A$m's) Gaming Operations EBITDA (A$m's) QLD CARDIT EBITDA (A$m's) VIC No. of ebet EGMS CARDIT EGMS VIC CARDIT Penetration 100% 100% 100% Gaming Systems EBITDA (A$m's) Gaming Operations EBITDA (A$m's) VIC CARDIT EBITDA (A$m's) CARDIT EBITDA (A$m's) SOURCES: CIMB, COMPANY REPORTS As a result of the above, we expect EBITDA growth of 10% yoy in FY15 (spurred by new contracts) before rebasing in FY16 and then 6.4% growth yoy in FY17. We believe CARDIT has significant scope for growth above these estimates and we see the potential for earnings surprise biased to the upside. Key driver 2: Victoria In October 2013 the Victorian Government introduced legislation requiring pre-commitment technology on every EGM in the state by 1 December The pre-commitment scheme allows players to set limits on the amount of time and money they spend and track their gaming machine activity across the state. This change in legislation is prompting venues to have systems in place by December 2014 ahead of implementation on 1 December 2015.

10 Figure 10: Victoria EBITDA impact (A$m s) FY15F FY16F FY17F Gaming Systems CARDIT Other Systems Gaming Operations CARDIT Other Systems Total SOURCES: CIMB, COMPANY REPORTS We understand that ebet plans to amortise the revenue associated with the Victorian business over a five-year period. We forecast this will add A$1.9m to Group EBITDA in FY15. ` Figure 11: SWOT analysis Strengths Proprietary software Strong market position Strong customer relationships Opportunities Increasing penetration of CARDIT Victorian market opening up Expanding market Weaknesses Dependence on domestic market EGMs are politically sensitive Size relative to competition Threats Increased competition Increased regulation on EGMs EGMs losing share to other forms of gambling SOURCE: CIMB RESEARCH, COMPANY RISKS Change in competitive landscape The key risk to our ebet estimates is if any of its main competitors in the systems markets intensify their focus on the Australian club and hotel market. We think this is unlikely as the main competition comes from the major slot machine manufacturers (Aristocrat, IGT and Bally), which are more focused at the group level on developing and marketing EGMs and, at the system level, tend to allocate their resources to top-tier customers such as the major casino groups. Increased regulation on EGMs Australia s slot machine market is a hot political topic, with few people publically defending the industry making it an easy target for enhanced regulation, often focusing on harm minimisation. Given the recent introduction of the rule of forfeiture, smoking bans and pre-commitment, we believe the spotlight is off the industry for the time being, but unforeseen regulatory change is always a risk in gaming. However, the recent changes have been a net positive for ebet and other systems suppliers as venues have had to become more data focused to comply. EGMs losing share of gambling wallet Australian wagering companies often highlight the EGM market as a source of wagering spend growth. We would argue that given the player experience and demographics are significantly different between EGMs and wagering, this is highly unlikely to have a material impact on ebet.

11 FINANCIALS P&L We forecast FY15 to be a strong year for ebet, driven by significant growth in gaming systems arising from new venues in Victoria and continued CARDIT penetration in NSW. In addition, the earnings boost is driven by the recent acquisition of FlexiNet (for which we assume little earnings growth). This strong growth offsets expected further weakness in the gaming machines business. Figure 12: ebet segmentals (A$m) FY13 FY14 FY15F FY16F FY17F Revenue Gaming Systems Gaming Machines Gaming Operations Business Intelligence Other EBITDA Gaming Systems Gaming Machines Gaming Operations Business Intelligence Other SOURCES: CIMB, COMPANY REPORTS We forecast FY15 EPS of 23c (+21% yoy), rising to 30c in FY16 and 32c in FY17. Figure 13: ebet: Profit & loss (A$m) FY13 FY14 FY15F FY16F FY17F Sales Expenses (36) (33) (38) (40) (43) EBITDA Depreciation (4) (4) (5) (4) (4) EBIT (incl Associates) Net Interest (0.6) (0.1) PBT Taxes (0) (1) (1) (1) (1) Profit After Tax Net Earnings EPS ($c) SOURCES: CIMB, COMPANY REPORTS Balance sheet and cash flow We expect the group to generate strong cash flow over the forecast period and to enter a net cash position of A$5.3m in FY15, rising to A$6.3m in FY16 and A$7.4m in FY17. This is based on the following assumptions: Capex of 1.5x depreciation to support growth in Victoria and CARDIT in NSW. Dividend payout to increasing from A$0.54m in FY14 to A$1.3m in FY15. Free cash flow increasing from A$0.4m in FY14 to A$1.34m in FY15.

12 Figure 14: ebet: Balance sheet (A$m) FY13 FY14 FY15F FY16F FY17F PP&E Investment Intangible Assets Deferred Tax Fixed Assets Inventory Recievables Payables Working Capital Other Current Assets Other Current Liabilities Net Capital Employed Net Debt 0 0 (5.3) (6.3) (7.4) Provisions Other Long-Term liabilities Shareholders Equity Net Capital Employed SOURCES: CIMB, COMPANY REPORTS Figure 15: ebet: Cash flow (A$m) FY13 FY14 FY15F FY16F FY17F EBIT Net Interest (0) Tax (0) - (1) (1) (1) Depreciation & Amortisation Working Capital and Other (4) (5) 1 (1) (1) Net Operating Cash Flow Capital expenditure (4.38) (2.66) (7.03) (6.02) (6.33) Free Cash Flow (0.13) Divs to shareholders - (0.54) (1.20) (1.57) (1.70) Free Cash Flow (post div) (0.13) Acquisitions - (0.36) (4.00) - - Disposals Net Issuances Net Borrowings (1.37) (1.29) Net Change in Cash (1.219) SOURCES: CIMB, COMPANY REPORTS

13 VALUATION AND RECOMMENDATION DCF valuation generates fair value of A$4.57 While ebet competes in the systems space with global listed companies, the relative division within its domestic competitors is very small at the group level and their focus is on a different client base so a peer-based comparative valuation is not appropriate, in our view. Hence we have opted to employ a DCF valuation, which generates a target price of A$4.57. We initiate coverage with an Add rating. Our DCF valuation is derived based on the following key assumptions: A WACC of 9.1% A risk free rate of 4.25% Cost of debt of 3.2% Equity weighting of 96% A long-term growth rate of 2.5% An adjusted beta of 0.99, based on two-year weekly data, which we believe best captures the business as it currently stands. Figure 16: ebet discounted cash flow (A$m) FY15F FY16F FY17F FY18 FY19 FY20 EBIT Depreciation Tax (1) (1) (1) (2) (2) (2) Capex (7) (6) (6) (6) (6) (6) Working Capital Free CashFlow WACC 9.1% Terminal Growth Rate 2.5% Present Value of Cash Flows Terminal Value 68 Implied Value 81 Net Debt 0 Equity Value 81 Per Share 4.57 SOURCES: CIMB, COMPANY REPORTS

14 Financial summary ebet Year end June Closing price (A$) 4.00 Target price (A$) 4.57 Income statement (A$m) 2014A 2015F 2016F 2017F 2018F Valuation metrics Divisional sales Preferred methodology DCF Valuation 4.57 Total revenue DCF valuation inputs EBITDA Rf 4.25% 10-year rate 4.25% Associate income Rm-Rf 6.00% Margin 3.2% Depreciation (4.0) (4.7) (4.0) (4.2) (4.2) Beta 0.99 Kd 3.2% EBITA CAPM (Rf+Beta(Rm-Rf)) 9.3% Ke 9.2% Amortisation/impairment Equity (E/EV) 96.0% Minority interest (A$m) EBIT Debt (D/EV) 4.0% Net debt (A$m) -5.3 EBIT(incl associate profit) Interest rate 4.0% Investments (A$m) 0.0 Net interest expense (0.1) Tax rate (t) 20.0% Equity market value (A$m) 79.6 Pre-tax profit WACC 9.1% Diluted no. of shares (m) 17.4 Income tax expense (0.7) (1.0) (1.3) (1.4) (1.5) DCF valuation (A$) 4.57 After-tax profit Minority interests NPAT (normalised) Multiples 2015F 2016F 2017F 2018F Significant items Enterprise value (A$m) NPAT (reported) EV/Sales (x) EV/EBITDA (x) Divisional revenue (A$m) 2014A 2015F 2016F 2017F 2018F EV/EBIT (x) Gaming Systems PE (normalised) (x) Gaming Machines PEG (normalised) (x) Gaming Operations Price/Book (x) Business Intelligence Other At target price 2015F 2016F 2017F 2018F EV/EBITDA (x) PE (normalised) (x) Comparable company data (x) 2016F 2017F 2018F Divisional EBITDA (A$m) 2014A 2015F 2016F 2017F 2018F Aristocrat Leisure EV/EBITDA Gaming Systems Y/E September EV/EBIT Gaming Machines PE Gaming Operations PEG Business Intelligence Other Per share data 2015F 2016F 2017F 2018F Cash flow (A$m) 2014A 2015F 2016F 2017F 2018F No. shares EBITDA EPS (normalised) (cps) Change in working capital (3.7) 0.9 (0.6) (0.8) (0.8) EPS (dil. normalised) (cps Net interest (pd)/rec Dividend per share (cps) Taxes paid 0.0 (1.0) (1.3) (1.4) (1.5) Franking (%) 50% 50% 50% 50% Other oper cash items (0.8) Dividend payout ratio (%) 30.0% 30.0% 30.0% 30.0% Cash flow from ops (1) Dividend yield (%) 1.7% 2.2% 2.4% 2.5% Capex (2) (2.7) (7.0) (6.0) (6.3) (6.4) Disposals/(acquisitions) (0.4) (4.0) Growth ratios 2015F 2016F 2017F 2018F Other investing cash flow Sales growth 17.3% 6.1% 7.3% 6.5% Cash flow from invest (3) (3.0) (11.0) (6.0) (6.3) (6.4) Operating cost growth 15.7% 5.8% 7.4% 7.3% Incr/(decr) in equity EBITDA growth 24.4% 7.6% 6.8% 3.4% Incr/(decr) in debt (1.3) EBITA growth 31.5% 28.5% 7.9% 5.3% Ordinary dividend paid (0.5) (1.2) (1.6) (1.7) (1.8) EBIT growth 31.5% 28.5% 7.9% 5.3% Preferred dividends (4) Reported NPAT growth 37.0% 31.7% 7.9% 4.7% Other financing cash flow Normalised NPAT growth 37.0% 31.7% 7.9% 4.7% Cash flow from fin (5) (1.8) 6.8 (1.6) (1.7) (1.8) Reported EPS growth 20.6% 30.0% 7.9% 4.7% Forex and disc ops (6) Normalised EPS growth 20.6% 30.0% 7.9% 4.7% Inc/(decr) cash ( ) (1.2) Equity FCF (1+2+4) Gaming Systems -3.6% 1.3% 9.7% -0.3% Balance sheet (A$m) 2014A 2015F 2016F 2017F 2018F Gaming Machines -76.1% -20.0% n/m n/m Cash & deposits Gaming Operations 60.9% 10.8% 8.8% 8.5% Trade debtors Business Intelligence % 21.8% 0.8% 0.9% Inventory Other n/m n/m n/m n/m Investments Goodwill Other intangible assets Fixed assets Other assets Operating performance 2015F 2016F 2017F 2018F Total assets Asset turnover 23.7% 24.7% 24.0% 23.6% Short-term borrowings EBITDA margin 20.1% 20.4% 20.3% 19.7% Trade payables EBIT margin 10.3% 12.5% 12.6% 12.4% Long-term borrowings Net profit margin 8.3% 10.3% 10.4% 10.2% Provisions Return on net assets 18.4% 20.8% 19.9% 18.7% Other liabilities Net debt (A$m) Total liabilities Net debt/equity -19.8% -20.8% -21.4% -22.2% Preference shares Net interest/ebit cover (x) Hybrid equity ROIC 15.1% 21.1% 20.5% 19.5% Share capital Other reserves Internal liquidity 2015F 2016F 2017F 2018F FCTR Current ratio (x) Unrealised gains/losses Receivables turnover (x) Retained earnings Payables turnover (x) Other equity Total equity Assumptions 2015F 2016F 2017F 2018F Minority interest AUD/USD Total shareholders' equity Total liabilities & SE SOURCES: CIMB FORECASTS, COMPANY REPORTS

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