Morningstar | We are placing a wager on Tabcorp's ability to transition to the brave new digital world of betting.
Wagering dominates Tabcorp's earnings mix and furnishes the company with a narrow moat on the strength of its licences as the sole pari-mutuel operator and exclusive provider for retail in most Australian states. Unfortunately, the nature of wagering lends itself perfectly to the borderless online digital environment, which spawns new operators in other states and allows punters to bypass Tabcorp's extensive retail brick-and-mortar channels. Management is admirably transitioning the company into the digital world, with significant investments in online infrastructure and product, while leveraging its incumbent status and physical reach. Further, the addition of Tatts’ near-monopoly lotteries business should help smooth the earnings volatility, and facilitate stronger cash flow generation. This should provide the company with additional financial firepower to reinvest and strengthen its digital wagering offering.Tabcorp Holdings is an Australian gambling entertainment company. Co. has three segments: Wagering and Media operations, which includes its network of TAB agencies, hotels and clubs, and on-course totalisators in Victoria, New South Wales and the Australian Capital Territory (ACT) as well as its Three Sky Racing television channels broadcasting thoroughbred, harness and greyhound racing and other sports; Gaming Services business, which consist of Tabcorp Gaming Solutions that provides a mix of gaming capabilities, services, advice and financing to licensed gaming venues; and Keno business, a random number game that is distributed to clubs, hotels and TABs and is available online in the ACT.
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