Endeavour: Market Overreacts to Victoria's Tightening Gaming Legislation

We forecast the proposed gaming restrictions unveiled by the Victorian government to weigh on Endeavour’s long-term earnings. However, we estimate the impact on the group’s intrinsic value to be less severe than the market anticipates—considering the 10% decline in Endeavour’s share price on the back of the news. While we also expect New South Wales to follow suit, we estimate the combined decline in earnings at a relatively moderate 7% from fiscal 2025, with the valuation impact partially offset by the time value of money. We lower our fair value estimate on Endeavour by 5% to AUD 6.10 and shares screen as undervalued. We expect Endeavour’s larger retail segment—accounting for about 60% of group earnings and underpinning its wide economic moat—to be unaffected to changes in gaming regulation. Endeavour’s management hasn’t provided quantitative guidance on the impact of the Victorian reforms.