Portfolio Update – Purchase of Tabcorp Holdings Limited (ASX: TAH)

By May 26, 2022Portfolio

Across client accounts, we have bought Tabcorp Holdings Limited (ASX: TAH), Australia’s only licensed Lottery & Keno operator.

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

  • We believe the separation of the Lotteries & Keno business from the Wagering & Gaming Services segments is positive for investors. The two business segments and their structures are unique and attract different investors. We are of the view that the separate entities will be worth at least as much as the current combined entity.

  • The Lottery Corporation (ASX: TLC), that will operate the Lottery and Keno games, improves the portfolio’s defensive exposure. The Lottery Corporation acts as an effective monopoly as Australia’s only licensed lottery and keno operator, possessing long-dated operational licenses across most Australian states. These long-dated licenses also help alleviate regulatory risk.

  • The Lottery Corporation has strong recurring revenue driven by a loyal customer base and a strong brand name. This recurring revenue has also proved to be resilient throughout the economic cycle, with further growth to be driven by product innovation, game changes & omni-channel delivery.

  • The Lottery Corporation has significant earnings upside as it continues to increase its digital sales and continues to scale. The Lottery Corporation earns a higher margin on its digital sales, and as the business continues to invest into this online market, we expect margins to improve over the investment horizon, resulting in strong earnings growth.

The purchase of TAH has been funded through the de-weighting of several portfolio holdings.


As always, thank you for your ongoing support, and should you require further information, do not hesitate to contact your adviser.

 

WARNINGS AND DISCLOSURES: This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement (“PDS”) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Service Pty Ltd ABN 52 130 772 495 AFSL 325 252 (“Elston”). Although every effort has been made to verify the accuracy of the information contained in this material, Elston, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information.

Prepared by:
EP Financial Services Pty Ltd
ABN 52 130 772 495 AFSL 325 252 (“ELSTON”)
GPO Box 2220
Brisbane Q 4001