Purchase of Tabcorp Holdings

By September 3, 2018Portfolio

Across the portfolios, we have bought Tabcorp Holdings (TAH), a diversified gambling entertainment group offering a diverse product range including wagering, lotteries, Keno, media and gaming services throughout Australia. This purchase has been funded from the sale of Healthscope (HSO).

We are positive on the medium-term outlook for TAH for the following reasons:

  • the Tatts merger adds a complimentary business with stable revenue and long-term exclusive licenses
  • the merger also provides opportunity for substantial synergy benefits
  • increasing lottery sales via digital channels provides scope for margin improvement
  • the combined wagering business enjoys a dominant market position and improving regulatory environment
  • the gaming services division is growing strongly, enjoys inflation-linked price increases and has excellent margins

As with all investments it is not without risks which include operating in a highly regulated industry with increasing restrictions aimed at protecting customers. The online wagering environment where corporate bookmakers have in recent years enjoyed a cost advantage is particularly competitive, and ‘synthetic lottery’ operators like Lottoland pose a threat to the monopoly position traditionally enjoyed by incumbent lottery providers – proposed regulatory changes may, however, help ease both the latter pressures going forward.

This purchase is funded from the sale of Healthscope (HSO). While we remain positive on the long-term industry fundamentals given population growth and ageing demographics, the most recent results showed that organic revenue growth remains more subdued than we had expected.  Also, the threat of regulatory changes in the wake of the pending Federal election may mean that industry pressures will remain in the short to medium term

If you have any queries, please contact SB Wealth

 

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