Tattersalls Expected To Make Strong
ASX Debut
Investors are forecasting that the shares of Australia’s Tattersalls Ltd. (TTS.AU)
will jump by at least 10% when the A$2.1 billion gaming and lottery company is
listed on the stock exchange on Thursday.
Ahead of its first day of trading, Tattersalls sold shares to institutional investors
at A$3.10 and to retail investors at A$2.90 while raising A$300.2 million. Both
the retail and institutional sectors were heavily oversubscribed.
One hundred million shares are now available to new investors. Six hundred million
were allocated to existing shareholders who are the 2,500 beneficiaries listed
in the will of company founder George Adams.
John Gethin-Jones, head of global equities at Queensland Investment Corp., who
received an allocation of the stock in the bookbuild, said that “the tight liquidity
in the stock will make it a good float.” According to Sean Cunningham, a portfolio
manager at Perpetual Investments, the scarcity of shares could push the stock
as high as A$3.40 on the first day of trading. Cunningham declined to say whether
he had placed an order for Tattersalls shares.
Tattersalls joins other gaming companies on the Australian stock market. It should
easily become one of the Australian Stock Exchange’s top 100 companies and a
must-buy for the index funds. In terms of market capitalization, it will be only
one quarter the size of rival Tabcorp Holdings Ltd., (TAH.AU), smaller than slot
machine maker Aristocrat Leisure Ltd., (ALL.AU) but larger than Brisbane-based
wagering company Unitab Ltd., (UTB.AU).
Steven Marsh, senior portfolio manager at Trust Co. of Australia, who was allocated
Tattersalls shares in the bookbuild said, “we like the fundamentals of the gaming
sector in Australia. Long term, it’s a good industry to be in.” Marsh also holds
Tabcorp shares and he regards these as being the better value stock. Tabcorp,
which is a more diversified business with casino and media interests, also operates
outside Tattersalls home state of Victoria.
Tattersalls’ two side businesses, slot machines, which accounts for about 10%
of its revenue, and lotteries, which makes up another 10% of revenue, both rely
on Victorian state government licenses, which expire between 2007 and 2012.
QICs Gethin-Jones spoke positively about investing in Australia’s gaming sector.
“The sector has great defensive qualities – odd as it seems, people will gamble
even when times are hard,” he said. “This sector of the market has been under
a lot of consolidation recently and now there is potential for more of that to
come.”
Tattersalls became a public company after operating as a trust for 101 years.
It hopes that the change will increase its chances when it comes to renewing
the Victorian government licenses.
Tabcorp the Melbourne-based business, is the only other gaming operator in Victoria
state.
Present and future employees of Tattersalls were allocated 30 million shares,
representing 4.3% of available stock, in the restructure. Tattersalls had 289
full-time employees on its books on Dec. 31.
Tattersalls Chief Executive Duncan Fischer said in a statement that “the strong
demand for Tattersalls shares demonstrates the confidence of investors in our
company and our vision of being a leading international company providing gaming-based
entertainment products and services,” But despite the hype surrounding Tattersalls
IPO, not all investors bid for the stock.
Said Mark Daniels, head of Australian Equities at Aberdeen Asset Management,
who holds shares in only 25 companies, “I am already holding Tabcorp, which doesn’t
have quite the regulatory issues that Tattersalls has, but I don’t need to own
two gambling stocks,”
Tattersalls lead manager, financial adviser and bookrunner Goldman Sachs, JBWere.
The co-lead manager is Macquarie Equity Capital Markets and the lead adviser
is PricewaterhouseCoopers Securities.
