ALGO Update: Stay long CWN

Posted on | by Todd | Leave a Comment on ALGO Update: Stay long CWN

Our ALGO engine triggered a buy signal on CWN at $11.43 on August 11th.

With the current price around $11.77, the trade has been slow to develop but we still prefer the long side.

CWN will go ex-dividend tomorrow and pay shareholders 30 cents, with 60% franking.

Looking across the gaming sector, we see improving conditions for CWN, SGR and Tabcorp. Seasonal growth in tourist numbers will benefit all three of these names.

We see scope to reach upside targets of $12.80 in CWN, $5.10 in TAH and $5.75 in SGR over the medium-term. 

Crown Resorts

Tabcorp

Star Entertainment

Tabcorp – Oversold

Posted on | by Leon Hinde | Leave a Comment on Tabcorp – Oversold

Tabcorp is likely to trade higher, into the $4.50 range following independent expert Grant Samuel indicating the proposed $11 billion merger of gaming giants Tatts Group will deliver fair value for Tatts shareholders.

Tabcorp says the merger is expected to deliver at least $130 million in annual earnings from what it calls synergies and business improvements, tech integration, corporate cost savings and other consolidations.

It will take about two years to fully integrate the old Tabcorp and Tatts businesses,  according to Tabcorp.

 Tabcorp

 

Crown Resorts & TabCorp

Posted on | by Leon Hinde | Leave a Comment on Crown Resorts & TabCorp

Crown Resorts reported their FY17 earnings on Friday, and the result showed a 13% decline in revenue and 11% fall in EBITDA. Helping to offset this was a further $375m share buyback.

Based on $0.60 of DPS in FY18, Crown trades on a forward yield of 4.8%.

Chart – CWN

TabCorp Holdings reported FY17 earnings on Friday with underlying net profit of $179m, down 4% on the same time last year.  We see encouraging trends within the core wagering business with digital turnover up 14% and fixed odds revenue growth of 15%.

We expect the Tatts merger  to be completed by the end of the year and with the FY18 dividend yield at 6%, we see upside potential to $4.50 – $5.00.

Chart – TAH

 

 

 

Star Casino, Crown & Tabcorp

Posted on | by Leon Hinde | Leave a Comment on Star Casino, Crown & Tabcorp

The Australian-listed Star yesterday informed its investors that Ellerston Capital (25% owned by James Packer) now has a 5.07% stake.

Institutional investor, Perpetual, which is already Star’s biggest  shareholder, also increased their holding when Malaysian casino giant Genting sold down its stake.

Star & Tabcorp have “lower high” formations, where as Crown is displaying a bullish, “higher low” formation.

Chart – SGR
Chart – TAH
Chart – CWN

 

Tabcorp – 2019 Earnings Outlook

Posted on | by Leon Hinde | Leave a Comment on Tabcorp – 2019 Earnings Outlook

There are encouraging trends in the core Tabcorp wagering business and the pending merger with Tatts remains an attractive investment case.

Following the Tatts merger, we look at the earnings profile of Tabcorp in 2019 and assess the forward yield and EPS growth.

We estimate Tabcorp could see EPS increase by 15% by FY19, helping to underpin a forward yield of 6%.

Chart – TAH

 

 

Tabcorp & Tatts Merger Approved

Posted on | by Leon Hinde | Leave a Comment on Tabcorp & Tatts Merger Approved

The Australian Competition Tribunal has approved the proposed merger of TAH and Tatts Group (TTS),  on the basis that they are satisfied that the merger will result in substantial public benefits and on the condition that TAH divests its Odyssey gaming business.

We see scope for upside in TAH share price as a result of synergy cost savings and the prospect of a large scale share buy back program in 2018.

Chart – Tabcorp

 

TABCORP Fined $45 Million

Posted on | by Todd | Leave a Comment on TABCORP Fined $45 Million

Tabcorp has agreed to pay the largest civil penalty in Australian corporate history yesterday, as company officials admitted that they had failed in it’s obligation to strictly follow domestic Anti-money laundering laws.

The gaming company agreed to pay $45 million to the Federal Government and pledged to modify its protocol for management oversight and operational execution of their money laundering program.

We feel the “silver lining” to this story is that the ACCC will take a favorable view of Tabcorp’s admission of oversight and commitment to increasing internal surveillance when ruling on the pending merger with Tatts group.

Shares of the company have traded back to support at $4.50 in early trade. We view Tabcorp as a $5.00 stock in the medium-term and suggest adding to long positions at these levels.