Published: May 29, 2022

The Lottery Corporation’s debut on the Australian Securities Exchange

Tabcorp spin-off Lottery Corp instantly became a $10 billion company on its market debut on Tuesday as investors flocked to the highly profitable lotteries and Keno business – which could soon become a takeover target.

Sue van der Merwe, chief executive and managing director, touted the growth prospects of the dometic business, which has historically done well during economic downturns, and floated the possibility of expanding into international markets.

But Ms Merwe told The Australian Financial Review on her first day in the top job that she would not be drawn on the prospect of the group soon becoming a takeover target for investors looking for steady income and high profit margins from a monopoly asset.

She insisted the company, helmed by chairman Stephen Gregg and flanked by directors Harry Boon, Anne Brennan, Doug McTaggart and John O’Sullivan, was focused on “what we can control”, such as a growth strategy of new products and international markets.

“We feel it’s important we focus on the current business, and we don’t lose sight of the importance of that. Having said that, opportunities to grow outside that are something of interest to us. And something we need to unpack more with the board in the coming months,” she said.

Lottery Corp stock traded between $4.49 and $4.70 on its first day, closing at its high.

The group posted $611 million in earnings before interest tax, depreciation, and amortisation (EBITDA) from revenue of $3.2 billion in the year ended last June 30, according to pro forma calculations by the independent expert’s assessment of the Tabcorp demerger.

Ms Merwe said the lottery businesses has for decades performed well through recessions, and the prospect of inflation hitting discretionary spending – including gambling – was not a problem, while insisting the company upheld its responsible gambling obligations.

“You look back in history, we’ve got this proven ability to drive sustainable revenue growth, and we’ve seen that through downturns – through the GFC, for example, and other challenging economic cycles [and] through COVID. We’ve actually seen an acceleration of interest in our offering products,” she said.

Meanwhile, Tabcorp shares fell 81 per cent to $1.01, reflecting the demerger of its lotteries business.

Tabcorp retains its sports betting and gaming services businesses after shareholders overwhelmingly supported the demerger proposal and a new deal with Racing NSW secured industry support.

The wagering and media business, which includes the TAB and SKY Racing brands, has for years struggled to match the performance of the company’s lotteries business.

It returned to growth for the first time in four financial years in 2020-21, before succumbing to pandemic pressures in the first half of 2021-22. Across the same half, lotteries marched to a record result.


The Lottery Corporation share price debuts on the ASX boards

The Lottery Corporation Limited (ASX: TLC) share price has commenced trade on the ASX boards on Tuesday.

Key points

  • The Lottery Corporation has made its debut on the ASX today
  • This follows its successful demerger from Tabcorp
  • The Lottery Corporation is the new home of Tabcorp's lotteries and Keno businesses

The Lottery Corporation Limited (ASX: TLC) share price has commenced trade on the ASX boards on Tuesday.

In afternoon trade, the lotteries company’s shares are fetching $4.60.

The Lottery Corporation share price debut

The Lottery Corporation share price debuted on the ASX boards this morning following its successful demerger from gaming giant Tabcorp Holdings Limited (ASX: TAH).

Though, whether you can call Tabcorp a gaming giant anymore remains to be seen. Its shares are down a massive 81% to 99 cents at the time of writing, with the balance of power seemingly shifting to the ASX 200’s newest member.

Based on the current Lottery Corporation share price, it has a market capitalisation of approximately $10.24 billion, whereas new Tabcorp is valued at $2.2 billion.

What is The Lottery Corporation?

The Lottery Corporation is the new home of Tabcorp’s lotteries and Keno businesses.

Management highlights that the Lottery Corporation is an omni-channel business with a portfolio of high profile, recognised brands and games, strong digital growth and a retail footprint across ~7,000 retail outlets/venues. This makes it one of the largest in the country.

These businesses continued their solid growth in FY 2021, generating a 14.4% increase in EBITDA. This meant that its Lotteries and Keno businesses contributed 55% or $611 million of Tabcorp’s total EBITDA during the 12 months.

Pleasingly, since then, these businesses have continued their positive form. For example, in February, Tabcorp reported a 15.1% increase in Lotteries and Keno EBITDA to $358 million. Whereas the rest of the business reported earnings declines, which led to group EBITDA falling 5.5% over the prior corresponding period to $529 million.

The good news is that management still sees plenty of growth ahead. It notes that the business offers infrastructure-like asset qualities, with low capital intensity and upside potential from digital growth.

It could also prove to be a good option for income investors. Management highlights that the company will aim to pay out 70% to 90% of net profit after tax excluding significant items.

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