Tabcorp VS Aristocrat Leisure: the impact of Covid-19 examined

We look at some of the recent developments from ASX-listed gambling heavyweights Tabcorp Holdings and Aristocrat Leisure.

Tabcorp scraps dividend, stock rises

Tabcorp Holdings (TAH) saw its share price rise modestly in the opening hours of trade on Tuesday, after the company released a Covid-19 update to the market.

Here, the gambling company revealed that it had come to an agreement with its bank lenders regarding its Syndicated Facility Agreement 'for a waiver of leverage and interest cover covenants in relation to the next two testing dates.’

As a consequence of this agreement, Tabcorp noted that it would not be paying a final FY20 dividend. Even so, in response to this announcement, the company’s MD and CEO David Attenborough said:

'The waivers complement recent actions we have taken to preserve our liquidity and mitigate the financial and earnings impacts of COVID-19.'

Aristocrat raises fresh debt

Like Tabcorp, Aristocrat Leisure (ALL) has taken measures to shore up its liquidity position in the face of growing Covid-19 uncertainties, yesterday revealing that it had secured a new Term Loan B US$500 million debt facility.

The company noted that this debt facility would be used for general corporate purposes, would mature in October 2024, and would take the company’s total Term Loan B debt to US$2.35 billion.

In response to this announcement, Aristocrat's Chief Financial Officer, Julie Cameron-Doe noted:

'We are very pleased with the outcome of this debt raising which was significantly oversubscribed,' with it being added that 'The transaction is part of our ongoing strategy to further enhance our liquidity, [c]ontinue to invest for growth and position the Group to emerge strongly from the current COVID-19 related challenges.'

Tabcorp VS Aristocrat share price performance

Comparing the share price performances of both gambling companies, in the short-term we see that Tabcorp Holdings (TAH) and Aristocrat Leisure (ALL) have traded mostly neck-in-neck, with only a small disparity in terms of performance.

At the time of writing, and in the last month, ALL has risen 10.79% against TAH’s 6.38%; and in the last three months both have fallen as a result of the Covid-19 pandemic: ALL dropping 29.29% in that period, while TAH has dropped 30.63%.

Mind you, while both companies short-term performance is comparable, Aristocrat has significantly outperformed over a longer time-frame. Over the last five years ALL has risen an impressive ~231%; while TAH has destroyed long-term shareholder value in that period, dropping ~32%.

J.P. Morgan analysts seem to believe that this trend will continue over the next 12 months, too. The investment bank currently has an Overweight rating and a price target of $30.30 per share on Aristocrat Leisure; and an Underweight rating and $2.10 per share price target on Tabcorp Holdings.

How to trade ASX gambling stocks

You can use CFDs to trade the stocks we have discussed today – LONG or SHORT – through IG’s world-class trading platform now. For example, to buy (long) or sell (short) Aristocrat Leisure using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘Aristocrat ’ or ‘ALL’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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