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Analysts: Australian Gambling Stocks are a Gamble

"…Investing in stocks like Jupiters, Burswood or Crown Casino or any of the listed TAB operations will also depend on investors knowing whether their risk profile is for defensive or growth stocks. The gaming sector is undergoing change as major casino players seek further diversification, while several TAB players are on the acquisition trail.

"…ABN Amro Morgans' Bruce Low says the attraction of the gaming sector is that most investors see the industry as recession-proof.

"…ABN Amro senior analyst Sophie Mitchell says investors should also realise that half-year results of casino stocks can fluctuate, but even out in the long term.

"…Operational strengths of Jupiters in the latest half year were in commission gaming as well as keno and its Centrebet sports betting operations, Ms Mitchell says.

"Commission gaming, including the big-spending high-rollers, can often make or break a casino's profits. However, while there is a theoretical win rate of about 1.28 per cent to the house, the group's profits will depend on the amount of money being wagered, the number of big spenders being attracted and the number of times their winnings are turned over.

"Jupiters managing director Rob Hines said last month that Jupiters' high-roller business was inherently more stable than some other casinos because it aimed for the middle of the market rather than at the biggest gamblers.

"High-rollers winning more than expected at Crown Casino caused revenue and profit to drop sharply in the latest half year. Perth's Burswood casino group also had a difficult six months with gaming revenues down 0.9 per cent to $148 million. Its international high-roller business climbed $7.6 million to $42.3 million, largely because of a high win percentage of 1.56 per cent, up from 1.28 per cent in the previous period.

"…Moves by the major players in both casinos and TABs have seen attempts at diversification into each other's fields of activity. There has been speculation that Tabcorp could be interested in launching a bid for Jupiters following that group's recent unlocking of its restrictive founder shareholding structure…"

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