what a frustrating blue chip, page-16

takeover speculation - aireview Gaming To Become More Of A Gamble In 2006
January 16 2006 - Australasian Investment Review

Looking at the outlook for the gaming sector in Australia over 2006 ABN Amro notes there are a number of issues facing the participants, all of which are of significance in terms of potential impact for investors.

One obvious issue according to the broker is that of the Victorian licence renewals for gaming and wagering, as there is the chance the gaming licence could become open to competition and the review process for the wagering licences has begun and could result in new entrants or licence terms.

Another issue for wagering in the broker’s view is the possibility wagering is reverting to mean levels of growth after a strong period from 2000-2004. - (my comments - not so, latest figures indicate rise - I have already posted that info. on this thread).

As the broker notes part of this reversion could be attributed to smoking bans and the issue over broadcasting of racing events, but the broker suggests it also brings into question how defensive is the earnings stream in the sector.

In valuation terms the broker suggests the market is pricing in further consolidation in the sector, with possibilities in its view including further consolidation in the casino sector led by James Packer’s Publishing & Broadcasting (PBL) and the emergence of another multi-discipline player such as Tabcorp (TAH).

The broker suggests potential plays in the market this year include UNiTAB (UTB) considering either Tattersalls (TTS) or Sky City (SKC.NZ), with PBL and Tabcorp also considered potential suitors for the New Zealand company. Additionally, the broker suggests PBL may in fact look at Tabcorp, though such a deal would be more problematic given regulatory issues.

Given the mature state of the Australian gambling market the broker also suggests offshore expansion is possible, the broker noting both Tattersalls (TTS) and Tabcorp (TAH) have taken initial steps towards expanding their interests overseas.

Overall the broker has retained its neutral view on the sector, with only Tabcorp being rated as Buy. UNiTAB, Aristocrat (ALL), PBL and Tattersalls are all rated Hold by the broker, as is Sky City in New Zealand.



My comments:

James Packer's bias towards the gaming sector has now been mentioned in aireview and the Financial Review.

PBL may de-merge into two separate gaming and media companies (my speculation only).