Tabcorp Holdings Ltd (ASX: TAH) shares have been almost entirely flat over the past 12 months, but analysts at RBC Capital Markets predict that could be about to change.
RBC has issued a new research note on the gambling company, initiating coverage with an outperform rating and a bullish share price target, which I'll get to shortly.
First, let's have a look at how Tabcorp fared over the 2026 financial year.
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Earnings up on flat revenue
Tabcorp in August reported revenue of $2.64 billion, up 0.8%, and EBITDA of $431.7 million, up 10.3%.
The company paid total dividends of 3 cents per share, up 50%.
Managing Director Gillon McLachlan said of the result:
Midway through our turnaround journey, we're executing on the plan, continuing to exercise cost and capital discipline and the Company is delivering earnings growth. The new retail commercial model has been implemented, the National Tote will launch soon, TAB LIVE and our new Next-Gen terminals are being rolled out in pubs and clubs in approved States, and we've renewed key domestic and global media rights partnerships.
Mr McLachlan said the first two stages of the transformation plan "were to get fit and operationalise our game plan''.
He said that had been achieved, and the company's proposed acquisition of Betmakers Technology Group Ltd (ASX: BET), announced after the end of the financial year, would accelerate the strategy, allowing the company to release products faster and more cheaply.
Tabcorp shares looking like a good punt
RBC said in its research note that Tabcorp had strong forecast earnings growth, stable market share, and a sound balance sheet.
They added:
Tabcorp has leading positions in the Australian wagering, media and integrity services markets with wagering and gaming machine monitoring licences in key states. While the wagering market is mature and very competitive, Tabcorp's market share has stabilised and Tabcorp has returned to earnings growth.
RBC said the proposed Betmakers deal was a positive as it would help modernise Tabcorp's technology stack, "and be earnings per share accretive if the company can deliver upon the targeted $30 million in cost synergies''.
RBC is yet to factor the acquisition into its financial modelling however, as it believes there are still some risks to completion.
RBC has also factored in an expected cost from AUSTRAC action against Tabcorp.
RBC said:
While this is likely to remain an overhang on the share price, we believe any resolution is likely to be long-dated based on recent precedents. Tabcorp is focussing on improving its risk and compliance controls and governance and it has made some key appointments as part of the uplift. We have allowed for a $100m penalty in our valuation, equivalent to 4.4cents per share.
RBC has valued Tabcorp at $1.25 per share compared to the current share price of 96.25 cents.
Tabcorp is valued at $2.07 billion.
