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Should you bet on Tabcorp Holdings Limited?

Gambling and entertainment group Tabcorp Holdings Limited (ASX: TAH) has released its results for the half year to 31 December 2013. Tabcorp owns the wagering business TAB in both Victoria and New South Wales, the tab.com.au business nationally, and the popular Keno brand in Queensland, NSW and Victoria.

Importantly, Tabcorp holds gaming licenses which provide the company with effectively monopoly businesses. These licenses include NSW Wagering retail exclusivity until 2033 and Queensland Keno until 2047.

Interim Results

Tabcorp has reported revenue growth of just 1% to $1.045 billion, however growth in underlying net profit after tax rose a more respectable 4.2% to $74.6 million for the half. A fully franked interim dividend of 8 cents per share (cps) has been declared which is down from 11 cps in the prior corresponding period (pcp) but in line with the financial year 2013 final dividend.

Outlook

In October management provided a first quarter trading update which stated that revenues for the three months to 30 September 2013 had increased by 3.1% on the pcp. This suggests the second quarter result must have been particularly weak given overall first half revenue growth of only 1%.

Commenting on the second half, CEO Mr David Attenborough said that the company was “focused on increasing returns and driving productivity improvements across the group.” No specific guidance for the full year was given.

Foolish takeaway

It appears the scene has been set early during reporting season for an uninspiring set of results from the gaming sector. Yesterday Echo Entertainment Group Ltd (ASX: EGP) reported weak top line revenue growth. It will be interesting to see how other sector peers which earn the majority of their earnings domestically, including Jumbo Interactive Limited (ASX: JIN) and Tatts Group Limited (ASX: TTS), have fared over the past six months.

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Motley Fool contributor Tim McArthur owns shares in Echo Entertainment Holdings Ltd.

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