Tabcorp Holdings Limited

Sales Growth, Digital Performance Supported Lotteries & Keno in FY 2018: With regards to Lotteries and Keno, Tabcorp Holdings Limited (ASX: TAH) had stated that this business posted revenues amounting to $1,390.7 million in FY 2018. The business was supported primarily by robust momentum in the sales with regards to the retail network and by the robust digital performance. However, Lotteries and Keno witnessed EBITDA amounting to $255.6 million in FY 2018.


Lotteries and Keno (Source: Company Reports)

In FY 2018, on the YoY basis, the company had witnessed a rise in the important margins. The company’s operating margin stood at 6.3% in FY 2018 which implies the YoY rise of 1.8%. The company’s net margin has also improved to 0.7% in FY 2018 reflecting the rise of 1.6% on FY 2017.

Combination with Tatts Group to Support TAH Moving Forward: Tabcorp Holdings Limited is expected to get supported by the Tatts Group. The company would be working towards the growth opportunities. Moreover, the deployments by the company would support the regulatory compliance as well as the risk management.

Also, in FY 2019, the company would be adopting a disciplined approach towards the capital expenditure, operating expenses as well as towards the management of the balance sheet. Moreover, the company is expected to be supported by the higher regulatory certainty as well as by the long-dated licences.

Stock Recommendation: On the daily chart of Tabcorp Holdings Limited, Exponential Moving Average or EMA has been applied and default values were considered. As per the observation, the stock price has crossed the EMA and is moving in the upward direction. This movement suggests that the stock is expected to encounter bullish momentum moving forward. 

Also, the company had witnessed decent growth in the margins which might support the investor’s attention on the stock. Moreover, the combination with the Tatts Group as well as the robust position of the company’s businesses is expected to act as tailwinds for the company in the long-term.

On the backdrop of the above-mentioned factors, we maintain our “Buy” rating on the stock at the current market price of A$4.710 (up 1.728% on January 21, 2019).
 

Transurban Group

ADT rose in September 2018 Quarter: Transurban Group (ASX: TCL) already published the update related to the September 2018 quarter. The company stated that ADT (or Average Daily Traffic) witnessed the rise of 3.3% and the growth was encountered throughout all the markets. The company stated that in September 2018 quarter, it, as a part of the consortium, managed to reach the financial close with regards to the acquisition of 51% of WestConnex from the NSW Government. In order to finance the acquisition, the company managed to raise equity amounting to $4.8 billion.

Toll Revenue (Source: Company Reports)

In FY 2018, the company garnered toll revenues of $2,249 million in FY 2018 which implies the rise of 8% thanks to the toll price escalation as well as growth in the traffic. The company’s EBITDA amounted to $1,649 million in FY 2018.
Distributions Are Expected to Rise: In FY 2018, Transurban Group’s net margin has witnessed a rise in the net margin from 7.7% in FY 2017 to 15% in FY 2018 which implies a rise of 7.3% YoY. As demonstrated by the annual report of the company, there are expectations that the company would announce a distribution of 59.0 cents per security which reflects a 5.4% rise as compared to the distribution of FY 2018.
 
The company also stated that it would be offering value to the shareholders with the help of the distributions. The company is also planning distribution of circa 100% of the FCF (or free cash flow) over time.

Stock Recommendation: On the daily chart of Transurban Group, Exponential Moving Average or EMA has been applied and default values were considered for the purposes. As per the observation, the stock price has crossed the EMA and is moving upwards. This signifies the bullish momentum and thus, the stock might encounter upward movement moving forward.

Moreover, the company’s target related to the distributions is also expected to support TCL. Based on the above-mentioned factors, we maintain our “Buy” recommendation on the stock at the current market price of A$11.890 per share.    

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