Tabcorp Holdings Limited Moves Lower On Release Of Investors’ Day Presentation

tabcorp

Australia’s leading gambling entertainment group, with its diversified set of operations, and extensive network of retail venues under a series of long-dated government issued licenses and authorizations organized its scheduled Investors meet on October 25, 2018.

Tabcorp Holdings Limited (ASX: TAH) actively manages the balanced game portfolio with a proven track record of delivering long-term growth. Initiations in respect of leveraging digital and product development to attract new customer segments has remained management’s key focus area in current time. Company will leverage the combination of Keno with lotteries for future growth prospects. Company is in continuous association with varied channel partners and is creating an omni-channel distribution model.

Detailed key financial metrics of the company along with current activities and upcoming and future growth projections from the management was the core part of the investor presentation. 

FY-18 transactions posted total revenue growth of 4.7% and EBITDA growth of 10.5%, with Lotteries and Keno contributing revenue of approximately $2.3B and EBITDA of $395M for FY18. With Continuous focus on returns through integration, well managed operating activities and strong balance sheet, company expects EBITDA synergies of at least $130M in FY21, gross Debt/EBITDA of 3-3.5x, capital allocation of $240m on proforma basis for FY18, operating expenditure to revenue ratio of 17.9% on proforma basis for FY18. Revenue synergy estimates include the cost of rolling out TAB venue arrangements to UBET states, including the payment of digital commissions. Revenue benefits are expected to grow with continuous yield improvement along with net initiatives under retail enhancement, Trackside roll-out, and Keno. Long-term debt is well in place and consistent with company’s long-term licenses in FY18.

Key take away points from the investor presentation:

  • Fixed odds trading system integration completed for racing in September 2018.
  • Commencement of UBET brand change to TAB across retail and digital by end 1H19.
  • Migration from retail to omni-channel distribution recorded an increase. Average spend 90 days pre/post transition from registered retail players to omni-channel account showed an increment of approximately 52%.
  • Removal of duplication, re-negotiation of commercial contracts and de-commissioning of UBET host system being planned.
  • Digital share of sales reported 27.8% growth in FY18; and Company will be more focused on building stronger integration between retail and digital experience.
  • Business risk profile following increased scale and diversification from the acquisition of Tatts group in FY18 has significantly improved.
  • TAH has been successful in maintaining the investment grade rating.
  • Access to global debt capital markets showed significant improvement.

Going forward, Company expects improvement in return on invested capital (ROIC). Improvement in ROIC will be backed by new initiatives and improvisation in business and merger synergies, disciplined approach to capital expenditure and rigorous investment made in organic growth initiatives. It also targets 100% dividend payout ratio by FY19. Further, investment growth initiatives along with integration benefits are expected to deliver improved returns over FY19-FY21.

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TABCORP has outperformed the ASX100 by 60% on a total shareholder return basis since 2013. TAH currently trades at the market price level of $4.615, down 2.64% on October 25, 2018 (3:15 PM AEST).


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