If you want a safe investment than the Australian gaming industry should be your choice
Australia has always been a gambling hub ever since it was first established. It seems that the traditions of the settlers, that mainly came over from the United Kingdom such with their descendants, and the country’s gaming industry is now booming.
However, Aussies have a completely different understanding of a booming industry as it seems. Much like the rest of the world, the gambling industry in Australia is slowly but surely inching its way towards a state-run monopoly, where a single corporation holds the biggest market share, while competitors try and fail to remain in the market simply due to government pressure as well as lack of funds to keep up
In Australia’s case, this is the exponential and fast growth of Tabcorp, the country’s largest gambling corporation to date. But the good news is that the company is publicly listed, which gives investors the opportunity to jump on the government-sanctioned growth bandwagon and enjoy a 5% dividend on a yearly basis.
Why is there a monopoly?
Calling it a monopoly right now is a bit harsh to be honest, as it hasn’t really been confirmed or called one officially yet, but any person with the understanding of economics, or the knowledge of what was happening in the past with Standard Oil in the United States, will easily connect the dots and see how the government is supporting this corporation’s immense growth.
Starting in 2017, the Australian government implemented new guidelines for gambling operators within the country. Some of the biggest hitting rules were that locally registered or unlicensed companies did not have the right to offer their services to the Australian customer base, and neither did locally unlicensed entities have the right to target foreign jurisdictions.
This put a large pressure on relatively small companies, which couldn’t afford full regulation. This caused the majority of companies to flee the country for better deals in places like the Marshall Islands, Malta, the Isle of Man and in some cases even the United Kingdom. All of this happened by the end of 2018, and Tabcorp has been growing ever since.
Things such as casino banking for Australian players, national lotteries, offline casinos, online betting options, and various other gambling activities are owned, operated or supported by Tabcorp, which recently merged with their biggest rival Tatts.
The rumors about a potential monopoly started when the country’s Competition Agency didn’t even bat an eye about the merger and had no issue with the removal of more than half of Aussie companies from its jurisdiction.
Very few knew why exactly this was happening, and none of them were from the regular customer base of Tabcorp. Everything became quite obvious when the corporation released its new presentation this year.
In the presentation, it’s mentioned quite proudly that 38% of all of the revenue generated in 2018 was handed over to the government, while the employees and shareholders were only paid 14% of the revenue. This amounts to less than half in “taxes”, which some believe were just bribes to the government.
How does this make Tabcorp a good investment?
Although the situation can be considered a little bit unethical, it doesn’t mean the market is going to falter. And by that, I mean that Aussies haven’t really complained about the situation too much yet. It seems that even though there is a monopoly going on in the Aussie gambling market, the prices and the service manager to remain customer-friendly, and will do so in the future.
As long as Tabcorp is keeping the government happy though paying large amounts in taxes, it’s unlikely that they will interfere with the gambling industry anytime in the future, nor will they actively try to disrupt the gaming sector for their personal gain, as they’re already gaining.
The only real risk in the investment would be the potential of implementing a law that would tone down the gambling activities within the country. But the gaming has been embedded in the conscious of Aussies so much, that it will definitely not do too much. The government is better off just allowing Tabcorp to grow and continue paying its millions in taxes.
The AUD is reliable
It needs to be emphasized that all of the dividends an investor will receive from Tabcorp will be in Australian Dollars, therefore the investment needs to be in AUD as well. Considering the overall volatility of the AUD, it’s safe to say that it’s one of the most stable currencies out there.
This will especially be the case should a global recession occur worldwide. The currency is referred to as commodity currency, meaning that it’s very heavily tied to the country’s commodity exports, which come in the form of Iron Ore, Gold and Gas. Should the world experience some kind of recession, Australia has enough gold and commodities to back up both its economy and currency, as we all know that gold is like a safe haven during economic uncertainty.
Overall, investing in a developing monopoly for an industry that keeps on growing, paired up with a stable political and economic situation should be mouth-watering for any investor looking for stable dividends for the future.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.
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