The gaming industry could be worth a punt

THE gambling industry’s reputation as being recessionproof has been reinforced by a broker survey that found that householders would sell their children on the dark web before they renounce their weekly lottery ticket or horseflesh ‘investment’.

While that may be an exaggeration, the recent UBS survey shows that 31 per cent of Australians buy a lottery ticket once a week, and fewer than 10 per cent never buy one. Of the 75 per cent that buy a ticket at least once a month, 40 per cent said they would continue to do so if prices rose by 10 per cent, while fewer than 5 per cent of respondents said they would stop altogether.

When it comes to ASX gambling exposures, there’s no such thing as a dead-cert winner. But lotteries have enduring appeal, probably because (a) upstanding households don’t see it as a form of gambling (b) the outlay is relatively modest and (c) a seven-figure jackpot is life-transforming while a win on the nags isn’t.

Having demerged from Tabcorp (ASX:TAH), The

Lottery Corp (ASX:TLC) on Thursday pleased investors with a special dividend of 1c per share. Given the company’s policy is to pay out 80-100 per cent of net profits as dividends, this stock is emerging as a cash cow.

Conversely, the mantra at Tabcorp – now a pure-play wagering and racing media operation – is more about reducing costs and bolstering its digital market share. Tabcorp’s TAB25 drive includes slashing capex by $600m-$620m by 2023-25, along with a target to increase its digital market share from 25 per cent to 30 per cent.

Otherwise, Tabcorp’s performance looked solid but unspectacular.

In the casino sector, things have got messy, although the trashed valuations (arguably) make for a recovery case.

The owner of the Sydney money den, Star Entertainment Group (ASX:SGR) on Thursday posted a chunky $1.26bn loss (as forewarned) and launched an $800m capital raising, at a deeply discounted $1.20 a share. At face value it’s easy for existing holders to pass up on their three-for-five rights entitlement, given Star’s money laundering probes, shareholder class actions and arise in NSW pokies taxes.

Then again, Bruce Mathieson has quietly been building up a stake in Star. Given he’s the country’s biggest pokies operator via Endeavour Group (ASX:EDV), his judgment has to count for something.

The only listed pure-play sports bookie, Pointsbet (ASX:PBH) has incurred huge losses – $58m in the last quarter – to support its pioneering beachhead into the US sports betting market. Still, Pointsbet’s $467m valuation is intriguing, given it still has $387m of cash.

Perhaps it’s better to stick with the companies that sell the metaphorical pots and shovels to the miners, rather than doing the digging.

In this vein there’s a lot of love for electronic gaming machine makers Aristocrat Leisure (ASX:ALL) and Ainsworth Game Technology (ASX:AGI).

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.