Morgans initiates coverage on ‘one of the highest performing lotteries businesses in the world’ the Lottery Corp with an Add rating and $5.40 target price. The business has recently been demerged from Tabcorp ((TAH)).
The broker expects the company to deliver a fully franked dividend at a high payout ratio. The opportunity for future capital management is expected to arise as debt should be progressivelly paid off.
The company has licences to operate lotteries in every state and territory (except WA) for an average period of 21 years until expiry. There is no major renewal until Victoria in 2028.
Target price is $5.40.Current Price is $4.48. Difference: $0.92 – (brackets indicate current price is over target). If TLC meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges – negative figures indicate an expected loss).
