Tabcorp Holdings (TAH) - Betting on the right horse

Tabcorp Holdings, together with its subsidiaries, provides gambling, and entertainment and integrity services in Australia. It operates through Wagering and Media, and Integrity Services segments. The company was founded in 1961 and is based in Melbourne, Australia.‍

‍

Tabcorp Holdings posted first-half FY26 operating earnings (EBITDA) comfortably ahead of market and Ord Minnett expectations, spurred by strong revenue growth and lower-than-forecast operating costs that drove wider earnings margins than anticipated, sending shares in the wagering and racing media group up a spectacular 24% on the day. The result was more impressive given wagering yields moved against the company in the period, with management pulling the right levers on market share – on our analysis of its rivals’ earnings Tabcorp has won a large slice of the cake – and expenses – cost savings outweighed expenses growth for the third-straight half-year period – to deliver the strong result.

‍

The tight rein on costs positions has provided Tabcorp with plenty of operational leverage, and we now model a 3% increase in EBITDA for every 1% increase in wagering revenue. Post the result, we have cut our EPS estimates by 3.6%, 6.3% and 8.2% for FY26, FY27 and FY28, respectively. We highlight the scale of these changes are exaggerated by the law of small numbers, with our forecasts still implying a compound annual growth rate (CAGR) in EPS of more than 20% over the forecast horizon.

‍

We raise our target price on Tabcorp to $1.17 from $1.02, while we trim our recommendation to Accumulate from Buy on valuation grounds.