Shares hit the jackpot: Lottery Corp at record highs on FY25 earnings beat
Shares jumped more than 8% on results day as TLC lifted dividends and doubled down on Powerball’s premium positioning.
Reporting season can feel a little like a lottery in itself - some wins, some losses, and the occasional jackpot surprise. The Lottery Corporation (ASX: TLC) has delivered a winning performance, with its FY25 results beating market expectations across all key metrics. While most numbers are down year-on-year, this reflects the cycling of last year's record jackpots.
The stock is rallied 8.0% ($5.73) to record levels, after trading mostly sideways since early 2023.
The earnings call contained a confident tone, with management doubling down on Powerball's positioning as a "premium" game.
“The Lottery Corporation's portfolio diversification and active management helped to deliver a resilient performance this year, as we continued to build strong foundations for a sustainable future," the company said.
For further insight on TLC's results, I spoke to Michael Teran of Blackwattle Investment Partners to talk results, his view on valuation and whether he rates the stock as a buy, hold or sell.
Lottery Corp (ASX: TLC) results
- Revenue down 6.2% to $3.74bn vs. $3.70bn ests (1.4% beat)
- Underlying EBITDA down 9.4% to $749.3m vs. $748.6m ests (0.1% beat)
- Net profit after tax down 11.2% to $365.5m vs. $356.1m ests (2.6% beat)
- Total ordinary dividend up 3.1% to 16.5 cps vs. UBS ests of 16 cps (3.1% beat)
Here are some of the insights from the TLC earnings call:
- Expects 50-75% retention following Powerball price increases and positions Powerball as "premium" game.
- Growth CapEx is focused on enhancing customer experience and engagement.
- No new guidance on OpEx, but updates expected at mid-year financials.
- Focus is on keeping costs below revenue growth.
For more information and market data on TLC, please visit Market Index.
What was the key takeaway from Lottery Corp's result in one sentence?
TLC delivered a solid result, managing costs very well given the backdrop of poor jackpot luck impacting revenue.
Were there any surprises in this result that you think investors need to be aware of?
The key surprise is the better-than-expected Powerball change. Powerball will have a circa 17% price increase in November, which is a higher quantum and earlier than the market expected. This highlights again the strong pricing power of this monopoly-like business.
Would you buy, hold or sell Lottery Corp off the back of this result?
RATING: BUY
TLC remains a core position in our portfolio since listing on the ASX and today reiterates TLC as one of the highest quality, defensive franchises on the ASX.
The market continues to underestimate the compounding benefits of TLC’s pricing power and FCF generation.
Are there any risks investors need to be aware of?
The key uncertainty for TLC is the upcoming Victorian licence expiry in June 2028. TLC is likely negotiating with the Victorian Government to deliver a win-win scenario for both parties.TLC’s strong balance sheet and FCF generation enables both investment in extending lottery licences and providing shareholder returns.
From 1 to 5, where 1 is cheap and 5 is expensive, how much value are you seeing on the ASX today?
We are very stock focused and tend not to take views on headline valuations. We focus on relative opportunities for high quality businesses, and we still see pockets of attractive valuations.
A quick look at Bloomberg shows the ASX 100 is trading on 18-19x PE, about 2 standard deviations above the 10-year average, so a simple observation is the market is looking more expensive than recent trading levels.
Never miss an update
Enjoy this wire? Hit the ‘like’ button to let us know.
Stay up to date with my current content by
following me below and you’ll be notified every time I post a wire
I'm an editor at Livewire Markets, with a passion for financial and investment education. With my background in funds management and a passion for making investment knowledge accessible, I am dedicated to crafting engaging content that empowers investors. I believe informed investing starts with well-told insights - and that knowledge should be readily available for everyone.
........
Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.
4 topics
1 stock mentioned
1 contributor mentioned
I'm an editor at Livewire Markets, with a passion for financial and investment education. With my background in funds management and a passion for making investment knowledge accessible, I am dedicated to crafting engaging content that empowers...
Expertise
No areas of expertise
I'm an editor at Livewire Markets, with a passion for financial and investment education. With my background in funds management and a passion for making investment knowledge accessible, I am dedicated to crafting engaging content that empowers...
Expertise
No areas of expertise
Comments
Comments
Sign In or Join Free to comment