In today’s daily we have covered stock research on Tabcorp (Overvalued/Expensive). To view 3 Undervalued Stocks to Buy click here

S&P 500 was up by 15.20 points or 0.81% to 1888.03 on Wednesday.  U.S. stocks rose on Wednesday, rebounding from the previous day's broad sell off, after minutes of the Federal Reserve's last meeting showed central bankers have discussed the eventual tightening of monetary policy but made no decisions on which tools to use.

The Dow Jones industrial average rose 1 percent, its biggest daily percentage jump since mid-April. Goldman Sachs was the top gainer on the blue chip index, up 1.9 percent at $159.35. Minutes of the Fed meeting showed the Fed staff presented several approaches to raising short-term interest rates, but said the discussion was simply "prudent planning" and not a sign rate hikes would come any time soon. Despite a better-than-expected first-quarter earnings season, Bank of America-Merrill Lynch gave a cautious outlook on prospects for the rest of the year and 2015.
 


S&P 500 Daily Chart   (Source – Thomson Reuters)
 
S&P ASX 200was up by 4.2 points or 0.08% on Wednesday and closed at 5424.6 points. Woodside Petroleum (WPL) has walked away from taking a stake in the Leviathan gas venture in Israel. Investa Office Fund has sold QBE house in the Melbourne CBD for $129.6 million.

Ruralco Holdings has posted a first half profit of $5.1 million, for the same period last year company posted a loss of $500,000. Media monitoring business iSentia is looking to list on the ASX next month with a market capitalization of $408 million.


S&P ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:-



 Stock of the Day – TABCORP (TAH)
 
TABCORP Holdings offers a range of gambling and entertainment products. Major businesses include wagering, keno and media activities across Australia. Customer brands include TAB, Keno, Luxbet, Sportsbet, TABCORP Gaming Solutions, Sky Racing and Sky Sports Radio. Its businesses operate as regional monopolies or duopolies with state government issued licenses.

TABCORP released a positive third quarter fiscal 2014 trading update, reporting growth in total wagering revenue of 2.7% relative to the prior corresponding period or pcp. This follows a 0.7% decline in the first half and a 4.8% decline in the fiscal 2013. Positively, TABCORP also saw a slowdown in the rate of turnover decline at retail outlets, down 0.6%. Revenue from digital channels accelerated in the quarter from the first half and up 20%against the previous corresponding period.


Source - TAH

Although Racing Victoria has increased Race Field Fees (RFF), TAH’s relative cost position may improve. The increase to a large 100% fixed odds, bookmaker could be A$5mn or A$10-$15mn if the Racing Victoria model is adopted nationwide. That could represent 15-25% of future Australian operating profit although cost mitigation strategies are likely to significantly alleviate that impact. Had this RFF model applied in FY14, TAH's costs would have increased A$6mn at an EBITDA level (A$4mn NPAT).
  

TAH Daily Chart  (Source - Thomson Reuters)

Given our concern about the shift in customer preferences to fixed odds and online wagering we are pleased with the inroads TABCORP appears to be making in these segments particularly considering the aggressive market share focused strategies of the corporate bookmakers. However the decline in retail revenues will continue in the long term and risks remain around the proportion of lost turnover TABCORP can recapture as gamblers shift to online channels where competition is aggressive. We believe the stock is Overvalued at its current price and would review the stock at  a later date.
   

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