Tabcorp Holdings Limited
TAH Details
Tabcorp Holdings Limited (ASX: TAH) is an Australian-based diversified gambling entertainment group. It also has a wagering pooling hub in the Isle of Man and a vision distribution hub in Las Vegas, USA. The company operates through three business segments viz; Lotteries and Keno; Wagering and Media; and Gaming Services.
Solid Performance in H1FY22 (For the Six Months Ended 31 December 2021)
- It has recorded an 2.2% growth in its revenues to $2,934 million driven by growth across Lotteries & Keno and Gaming Services businesses.
- Revenue from the Lotteries & Keno segment increased by 10.9% YoY to $1,784 million and delivered a record first half profit result.
- Wagering & Media revenues reduced by 9.8% to $1,073 million with EBITDA at $148 million, down 34.8% mainly impacted by retail closures in the largest market, NSW.
- Earnings before interest, tax, depreciation, amortisation and impairment (EBITDA) declined by 14% over the pcp to $512 million.
Source: Analysis by Kalkine Group
Recent Update
- On 31 March 2022, the company declared that the Supreme Court of New South Wales has approved to hold a meeting (Scheme Meeting) with its shareholders to vote on a scheme of arrangement for the proposed demerger of The Lottery Corporation Limited by the company.
- On 23 February 2022, the company declared the winning of a 20-year non-exclusive retail and digital Keno licence in Victoria for an up-front payment of $25 million.
Key Risks
The group’s businesses are regulated by laws, licences, regulations, rules, permits, and other approvals. Any significant breach of the pertinent obligations or compliance could adversely affect its financial performance. Changes in laws and the regulatory environment would also have a bearing on its operations.
Outlook
The company is making sustained progress with its optimisation program ‘3S’ which delivered $16 million in actual EBIT savings in 1H22 and it continues to target $20-$25 million in EBIT savings from 3S in FY22. Apart from advancing the demerger of The Lottery Corporation, TAH continues to implement distinct growth initiatives for each of the businesses. Further, the company is going as per plan to finish the proposed demerger of The Lottery Corporation by June 2022 and it aims to seek shareholder support as part of the scheme of arrangement process.
Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)
Technical Overview:
Chart:
Source: REFINITIV
Note: Purple Color Line Reflects RSI (14-Period)
Stock Information
The stock has been valued using a Price/EPS multiple-based illustrative relative valuation and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to Price/EPS Multiple (NTM) (Peer Average) considering the lower profitability in H1FY22 and lower current ratio at 0.51x in H1FY22 compared to the industry median of 1.26x.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Considering the aforementioned factors and the associated business risks, we advise the investors to book profits.
We give a “Sell” rating on the stock at the closing market price of A$5.490 per share on 28th April 2022.
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.