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Wagering on the media for Tabcorp

The release of Tabcorp’s (TAH) first quarter trading update today has been met with muted trading.

All trading involves risk. Losses can exceed deposits.

- First quarter trading

- Support: $3.13, $3.19 Resistance: $3.30

First Quarter trading

The market is looking for more detail as to how the update will translate into earnings and how it will overcome licensing issues.

There were some highlights with total revenue through to 30 September, up 3.1% year-on-year to $503.9 million as revenue from media jumped 10.1% to $54.5 million; well ahead of estimates. Tabcorp games services (TGS) continued on its expected trajectory, adding $24.6 million in the first quarter with the medium estimate expecting it to add $100 million in FY14; having gone live in August last year and posting a $13.1 million turnover in the first quarter. This growth is healthy but not substantial.

What is disappointing is wagering revenues which remain constrained as joint ventures and licensing agreements continue to etch out profits. The company saw wagering revenues up 5.4% when incorporating the Victorian Racing Industry’s interest, however this figure drops to 0.1% period compare to period to $385 million once this interest is accounted for.

With 76% of revenue coming from wagering products it’s easy to see why fundamental traders have been indifferent to the betting giant and continue to monitor the international and private firms push into traditional markets through digital means. This is something TAH is looking to rectify however is under mounting pressure from developed international players.

The other real disappoint out of these numbers is the revenue from Keno. Revenues add 0.4% ($54.1 million) year-on-year and is well below expectations. This suggests that new the Victorian gamble laws are having an adverse effect on Keno turnover. With Keno representing 11% of TAH’s revenue, the uptake from TGS and media will have to improve dramatically to offset this drop off.

Technicals

TAH has been trending sideways now for four months, the bollinger bands illsutrate that each time TAH shifts two standard diviations from the 30 day moving average it revest back to this figure. With a muted response to the news today, the technicals look solid. I see support at the the bottom band at $3.13 and a good point for a pick up with a strong resistance leve at $3.30, which is two cents below the positive band.

Tabcorp four hour chart with 30-day moving average and Bollinger bands
Tabcorp four hour chart with 30-day moving average and Bollinger bands

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