As newly appointed Tabcorp boss Gillon McLachlan gets to work turning the country’s largest wagering operator around, one of the questions being asked is whether he’ll do a deal to sell its gaming services operation.
Analysts at Macquarie believe it is worth about $610m, based on an earnings before interest, tax, depreciation and amortisation multiple of about 10 times.
The calculations include the renewal of the NSW monitoring licence in 2032.
Yet some observers think it’s unlikely to sell for that price.
The NSW licence accounts for about two-thirds of its revenue, and it’ll be up for grabs in eight years. Tabcorp has tested interest in the unit before, but now it’s under pressure to drive down its debt, which crept up in the past year after it renewed the betting licence from the Victorian government for $600m.
At June, net debt was $860m as it sank almost $1.4bn into the red, a worse-than-expected result.
Macquarie analysts said in a research note that a gaming services sale was possible, given that it had no synergies with wagering and media and may provide a way to release capital for other needs.
Gaming services focuses on integrity services, mostly linked to slot machine monitoring, which has stable, predictable earnings with low capital intensity.
Under the MAX brand, Tabcorp is Australia’s largest slot machine monitor, with mostly exclusive licences and 67 per cent market share.
The analysts view the business as non-core and said there could be opportunities to acquire and or extend monitoring licences, which would maximise value under a sale.
“As such, we expect Tabcorp to show interest in the Victorian monitoring licence, which is exclusively held by Intralot until mid-2027,” they said.
Tabcorp may also look to renew the NSW monitoring licence early.
“ We are cautious on Tabcorp with significant change needed to improve competitiveness and profitability, under a new management team,” the analysts said.
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