Lockdowns Again Weigh on Tabcorp's Venue Earnings, but We Expect Recovery as Restrictions Ease

We maintain our AUD 3.70 fair value estimate for shares in no-moat Tabcorp following a trading update for the first quarter of fiscal 2022. Both the wagering and gaming services divisions waned as venues remained closed for much of the period--particularly in New South Wales and Victoria--dragging first quarter group revenue down 7% on the prior corresponding period, or PCP. By contrast, the lotteries and keno business (which generate the majority of earnings) remained broadly flat, with 1% revenue growth in lotteries--not materially impacted by shutdowns--offset by a 19% decline in keno. We lower our group fiscal 2022 EBITDA forecasts by 5% to AUD 1.1 billion. But with restrictions easing and the country gradually reopening, we see these as short-term headwinds, and our longer-term forecasts are broadly intact.