Tab Ltd paying well

TAB Ltd's share price has gone nowhere, and real growth looks questionable. Still, it is a defensive play. ACCUMULATE.

By Intelligent Investor · 23 Feb 2001

By Intelligent Investor ·
23 Feb 2001

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TAB Limited - TAB

Current price

n/a

Price at review

$3.32 at (23 February 2001)

All Prices are in AUD ($)

There's one thing you can say with certainty. No one who relies on Australians' love of gambling ever went broke. Although, amazingly enough, the latest report by Australia's second biggest listed gambling company shows gains, not so much from growth in business, but from an austere cost cutting campaign.

The NSW TAB saw its interim profit rise 32.3% to $41.2m. This figure is slightly deceptive because it includes an adjustment on the purchase of Sky Channel back in 1998. Even so, the result represents an increase of 10% or so.

Defensive play

Apart from that, the news is a bit dull and we haven't seen much share price movement since our issue 68 review (Accumulate - $3.32).

TAB is a good defensive play. The bad times do not affect gambling stock unduly - it is a sad fact of life that the gambling budget seems to be the last item to be squeezed. But there are risks. There is a long-term slowdown in growth in earnings from betting. That's probably the indication of a maturing market, but there is another threat and one which is potentially more damaging. And that is from the hand which gambling feeds – government.

In NSW the 12-month freeze on new gaming machines in clubs is likely to be extended indefinitely. If governments are forced to get serious about saving problem gamblers from themselves, the industry will have to look elsewhere for growth and that will be a lot harder to achieve. ACCUMULATE.

IMPORTANT: Intelligent Investor is published by InvestSMART Financial Services Pty Limited AFSL 226435 (Licensee). Information is general financial product advice. You should consider your own personal objectives, financial situation and needs before making any investment decision and review the Product Disclosure Statement. InvestSMART Funds Management Limited (RE) is the responsible entity of various managed investment schemes and is a related party of the Licensee. The RE may own, buy or sell the shares suggested in this article simultaneous with, or following the release of this article. Any such transaction could affect the price of the share. All indications of performance returns are historical and cannot be relied upon as an indicator for future performance.

Tab Ltd paying well

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Tab Ltd paying well

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