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Shares in Tabcorp Holdings Limited (ASX: TAH) have risen strongly this week on well-received profit results, but analysts at Macquarie warn the hard work is just beginning.
Shares in Tabcorp have increased from 71 cents on Tuesday to be trading at 94 cents on Thursday, a day after the company reported an underlying net profit of $49.5 million, up 76.8%.
Managing director Gillon McLachlan said at the time the "pleasing" result was down to the company being "fitter" and said there was more growth to come from increasing digitalisation and the ambition to create a national tote, which it would be working with the racing industry to achieve.
But Macquarie analysts are neutral on the stock, issuing a note to clients this week titled, "It gets harder from here".
Tabcorp is still in early-stage execution of its turn-around strategy, which includes new management across the businesses,
Early progress has been fast; the cost-out/containment is impressive, albeit targeting low hanging fruit, and importantly the five-pillar plan allows us to monitor future progress.
We are, however, cautious, with increased execution risks from here across key stakeholders (i.e., buy-in for national tote), along with regulatory outcomes (i.e., in-play betting/NSW reform) and with the wagering industry as competitive as ever.
Macquarie has a 12-month price target of 90 cents on the stock.
Mr McLachlan said earlier this week that Tabcorp was "fitter" than when he joined the company, with an improved culture around cost and capital discipline starting to bear fruit.
Tabcorp will pay an unfranked dividend of 1 cent per share on September 19 to shareholders registered on September 1.
