ASX:TLC
Lottery Corporation Ltd
Investment Summary
The fund managers believe that investing in Lottery Corporation Ltd (TLC) offers a strong opportunity for consistent long-term returns. They note TLC's business model as highly defensive, benefiting from moderate top line growth through population increases and product innovations. Although earnings may experience volatility due to jackpot fluctuations, they expect reasonable earnings growth and margin expansion from optimized product mixes and operational efficiencies. Moreover, its market position is favorable, as lotteries exhibit infrastructure-like characteristics with lower capital intensity compared to other infrastructure investments. Both fund managers recognize TLC’s resilience across economic cycles, attributing its steady revenue to the growth in online engagement and enhancements that amplify jackpots. They believe that ongoing product innovation and possible expansion of lottery licenses in Australia and New Zealand will contribute to additional value creation.
Commentary From The Managers
Blackwattle Investment Partners
31 July 2024
$4.97
- Blackwattle Investment Partners continues to hold Lottery Corporation Ltd (TLC.AX) despite recent underperformance.
- The fund's positions in Consumer Discretionary detracted from overall performance, primarily due to stock selection within the sector.
- An overweight position in The Lottery Corporation underperformed compared to cyclical consumer peers and the broader market.
- Despite being a discretionary stock, its revenues are characterized as defensive and stable.
- Blackwattle remains confident in Lottery Corporation due to the resilience of its sales through various economic conditions.
- The firm's investment thesis is bolstered by expectations of long-term margin improvement as it increases online penetration.
- Continued game enhancements are anticipated to drive larger jackpots and enhance consumer interest.
Cooper Investors
30 Sept 2023
$4.65
- Cooper Investors built a position in The Lottery Corporation (TLC) during the September quarter.
- TLC falls within the Stalwart Subset of Value, indicating a defensive business model.
- Expectations for reasonable earnings growth are based on moderate top line growth driven by population growth and product innovation.
- Potential for margin expansion exists through improved product mix and operating leverage.
- Earnings may experience volatility in the short term, influenced by jackpot sequences.
- Long-term returns from TLC are anticipated to be consistent.
- The company's strong market position is a significant attraction for this investment.
- Lotteries exhibit infrastructure-like characteristics and have a lower capital intensity compared to other infrastructure opportunities.
- There is potential for further value creation through product innovation and new or expanded lottery licenses in Australia and potentially New Zealand.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.