Stocks To Watch – TTS

Tatts Group provides gambling services and products. It currently owns a number of business units which operate in the gaming and lotteries division.

Tattersalls announced today that it will acquire NSW Lotteries for $850 million.

Although the acquisition is expected to double TTS’s underlying earnings by 2014, analysts are querying whether the price paid for the acquisition was too high.

The all-cash purchase represents 13 times one-year forward earnings, yet gaming companies usually trade around 9-10 times.

The purchase of NSW Lotteries will aim to build up for the loss of TTS’s Victorian state slot machine license expiring 2012 which was the main contributor to their earnings last fiscal year.

The high price tag has seen TTS punished in today’s session, with the group finishing the day down 7.3% at $2.30.

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