Credit Swisse upgrades lottery earnings estimates by around 5% as revenue momentum throughout March has signalled growth is substantial. The broker also reflects the prospect of a de-merger in its valuation after the company announced a strategic review.
A de-merger of the lottery business, with no change in the control of wagering, would avoid the requirement for industry approvals and likely one-off payments to separate the two.
The broker also assumes Tabcorp exits gaming services, effectively divesting 10,000 slot machines back to venue operators or third parties. Rating is upgraded to Outperform from Neutral and the target increased to $5.70 from $4.60.
Sector: Consumer Services.
Target price is $5.70.Current Price is $4.94. Difference: $0.76 – (brackets indicate current price is over target). If TAH meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges – negative figures indicate an expected loss).
