Australian Investment Blog

ASX:TAH 08/08/2018

Betting on Tabcorp

Stock

Tabcorp (TAH) $4.82 as at 08/08/2018

Event

Betting agency Tabcorp has rallied on what looks at first glance a poor result. The stock was sold off yesterday prior to the result but has bounced back strongly today despite missing consensus earnings by ~2% at $246.2m. The key to the market’s reaction has been the focus on the integration of Tatts post the merger completed earlier this year – it seems the market is starting to believe the purported $130m in EBITDA synergies expected in FY21, although only $8m has been delivered thus far. The result is somewhat messy, it includes costs associated with the merger as well as a $91m loss to close the Sun Bets UK joint venture with News Corp. Some of these impacts were offset by a highly successful Soccer World Cup in which Tabcorp realized $26m revenue and also saw active users rise and remain elevated after the event.

It seems those with the inside tip focused on a near-term miss while the market is optimistic around future integration & growth Tabcorp (TAH) Chart

Market Matters Take/Outlook

Tabcorp has a large competitive advantage to other betting agencies and a digital foot print which is unrivaled – this will help them sustain market share as more betting moves online. We do see risks in cannibalization of the Tatts-Tab business, already seen with the UBET brand being folded into Tab, however the combined entities unique market position should see market share sustained. We are neutral TAH at present, seeing support closer to the $4 level as an ideal entry point.

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