Gaming giant Tatts Group Limited (ASX: TTS) has seen its shares sink 5.5% today after the release of its full year earnings results.
The drop in share price may have opened up the opportunity for long-term investors to purchase stock in this gaming industry leader at an attractive price, with the market potentially misjudging the result.
The Results:
Focussing on the comparable results from continuing operations, Tatts has reported a 7.8% rise in before tax profits (PBT). It's appropriate to compare FY 2014 with FY 2013 at the PBT level as the 2013 after tax result was influenced by a one-off $16.2 million tax benefit.
Highlights for FY 2014 included growth in online sales across wagering and lotteries, increased registered members using Tatts products and growth in total bets placed.
The Opportunity:
Given the lacklustre performance of Tatts' stock over the past year, with the share price gaining 7.5% compared with a 10% rise in the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), any further share price weakness could offer up an appealing buying opportunity.
Tatts is a blue-chip, defensive company that owns or operates a number of appealing assets generally under long-term license agreements with state governments. These assets include NSW Lotteries, SA Lotteries, Queensland Lotteries and Queensland Wagering.
The Outlook:
The positive earnings trajectory achieved in 2014 is forecast to continue with management's outlook statement identifying a strong start to trading in the current financial year. This has seen racing revenue up 2.8% and sports revenue up 17.8%, leading to an overall increase in wagering revenue of 4% since 1 July.
