The Tabcorp Holdings Ltd (ASX: TAH) share price has started the week very strongly.
In morning trade, the gambling company's shares are up 22% to 90 cents.
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Why is the Tabcorp share price racing higher?
Investors have been bidding the company's shares higher today after it was awarded the new Victorian Wagering and Betting Licence by the Victorian Government.
According to the release, the new licence is for a period of 20 years (starting in August 2024) and creates a level playing field in Victoria for taxes and fees, enhancing Tabcorp's ongoing competitiveness.
To demonstrate just how much of a game-changer this new licence is, management provided investors with an idea of how it would have impacted its FY 2023 earnings.
It advised that had the new licence terms applied for the last financial year, its group EBITDA would have been $140 million higher on a pro-forma basis. Additionally, Tabcorp estimates that earnings per share post significant items would have been 44% higher and group ROIC would have improved 300bps from 5.5% to 8.5% on a pro-forma basis.
There are significant payments related to the licence. The release notes that the licence premium payments comprise of an upfront payment of $600 million in June 2024 and $30 million per annum ongoing fixed payments from August 2025 through to 2043.
However, the good news for the Tabcorp share price is that a capital raising won't be required for that upfront payment. The company intends to use existing debt facilities for it.
'Momentous'
Tabcorp's managing director and CEO, Adam Rytenskild, was delighted with the news. He said:
Today is momentous in the journey of our company post demerger. This is a positive outcome for our shareholders, the Victorian Government and industry stakeholders. I am particularly pleased with the terms we have secured under this new licence which directly addresses the structural reform required in the modern wagering environment. It's a licence that will allow us to ignite our total Victorian wagering business.
This announcement continues the strong momentum of our transformation. We are a faster, simpler and more nimble company. We're delivering on what we promise and offering our customers a better experience with faster speed to market and an attractive product offer. […] As the long-term industry partner, this New Licence ensures TAB remains part of the social fabric of local communities in Victoria.
