Tabcorp targets younger cohort via 20% stake in socialised digital wagering platform

Despite needing to dip into borrowings to pay its dividend, cover demerger costs from spinning out its lottery business earlier this year, and a $150m settlement with Racing Qld, Tabcorp (ASX: TAH) this morning confirmed its stumping up with an additional $33m to acquire a 20% Dabble Sports Pty Ltd.

Under pressure to remain relevant with digital customers after spinning off its lotteries business, management expects the 20% stake in the Melbourne-based socialised digital wagering platform, Dabble, to help strategically revamp its digital wagering offering, while exposing Tabcorp to a younger cohort.

Assuming the deal receives Northern Territory Racing Commission and probity approval, Tabcorp will have the right to appoint a director to the Dabble board.

Today’s announced stake in Dabble following plans, pre-announced during FY22 results to sell e-Bet. The transaction is expected to be completed in the first half of FY23 and result in a pre-tax gain of $39m.

What does Dabble do?

Founded 12 year ago by former chief operating officer at Pointsbet, Tom Rundle, Dabble is regarded as one of the fastest growing wagering brands in Australia, has 150,000 customers and June 2022 quarter annualised revenue of around $47m.

Dabble combines wagering offerings with social functions seen on Twitter and WhatsApp and offers customers the ability to copy bets placed by friends or others they follow.

Dabble is understood to have 100,000 registered users and in April this year was reported to be the second most downloaded Australian sports betting app.

Dabble has offices in Brisbane, Adelaide, Albury and Darwin where it is licenced.

Win-win innovation

Commenting on today’s announcement, management advised investors that the investment in Dabble aligns with Tabcorp’s strategy to grow digital market share and provide greater exposure to innovative product capability.

“We are transforming our company, with a clear strategy and united ambition to grow digital market share,” said Tabcorp’s new CEO Adam Rytenskild.

Tabcorp currently accounts for around a quarter of the market for digital betting revenue in Australia.

New app

Attempts by the company to introduce new digital offerings to punters, included a new app ahead of the AFL grand final last month and in time for the Spring Racing Carnival.

“The investment comes with the new TAB App now live on time as promised. The launch of the App has had an immediate impact with customers, delivering an 11% increase in weekly active customers compared to the 6 weeks prior to launch.”

Rytenskild recently noted that the new TAB app also provides a whole new digital foundation for the company, allowing it change products and provide updates to our customers faster.

A pre-Christmas update of the new TAB app is expected to include a social “betting with mates” feature and a same-race multi feature.

What brokers think

Tabcorp’s share price is down -3.40% over 12 months.

Consensus on Tabcorp is Neutral.

Based on Morningstar’s fair value of $1.11 the stock appears to be undervalued.

Goldman Sachs retains a Neutral rating on Tabcorp and a target price of $1.08.

Based on the six brokers that cover Tabcorp (as reported on by FN Arena) the stock is currently trading with 15.2% upside to the target price of $1.08.

Macquarie is encouraged that Tabcorp is under transition and notes the new Tasmanian monitoring licence and the proposed sale of the eBet business.

The broker’s Outperform rating and $1.10 target are unchanged.

With a new app coming and better marketing, Morgans expects the company's 24.9% digital revenue market share to improve.

The broker recently upgraded Tabcorp to Add from Hold with the target price increasing to $1.20 from $1.15.

Tabcorp was down around -1% at noon.