Payroll Jobs, Household Spending Data Bode Well for the Discretionary Space

This report is an updated version of the report published on 18 January 2024 at 4:39 PM AEDT.

Company Overview

The Lottery Corporation Limited (ASX: TLC) is an Australia-based lottery company engaged in providing lottery business across the globe. It operates through two segments: lotteries and keno. The Lott is the brand that unites the company’s licensed lottery operations in all states and territories of Australia, except Western Australia, under license arrangements. SG Fleet Group Limited (ASX: SGF) is an Australia-based motor vehicle and fleet management company. It is engaged in vehicle leasing, short-term hire, consumer vehicle finance, and salary packaging services in Australia, New Zealand, and the United Kingdom. The Kalkine’s Sector Report covers the Investment Summary, Sector Overview & Supporting Catalysts, Data Insights & Analysis, Financial Metrics, Financial Commentary, Risks, Outlook, Technical Analysis along with the Valuation, Target Price, and Recommendation on selected stocks.

Investment Summary

Sector Overview and Supporting Catalysts

Data Insights and Analysis

Index Performance

Key Drivers versus Key Constraints

Investment theme and stocks under discussion (TLC, SGF)

After understanding the sector, let us now look at two companies from the Discretionary space listed on the ASX. The price potential of the companies under discussion has been analysed based on the EV/Sales valuation multiple method.

1. ASX: TLC (The Lottery Corporation Limited)

(Recommendation: Buy, Potential Upside: Low Double-Digit, Mcap: AUD 10.26bn)

TLC is an Australia-based lottery company engaged in providing lottery business across the globe. It operates through two segments: lotteries and keno. The Lott is the brand that unites the company’s licensed lottery operations in all states and territories of Australia, except Western Australia, under license arrangements.

The stock has witnessed a dip of ~8.28% in last 6 months, and over the last one year, it has declined by ~3.14%. The stock has a 52-week low and 52-week high of AUD 4.350 and AUD 5.350, respectively, and is currently trading below the 52-week high-low average. TLC was last covered in a report dated ‘16 November 2023’.

2) ASX: SGF (SG Fleet Group Ltd.)

(Recommendation: Speculative Buy, Potential Upside Low Double-Digit, Mcap: AUD 772.88mn)

SGF is an Australia-based motor vehicle and fleet management company. It is engaged in vehicle leasing, short-term hire, consumer vehicle finance, and salary packaging services in Australia, New Zealand, and the United Kingdom.

The stock has witnessed a dip of ~4.96% in last 3 months, and over the last 9 months, it has increased by ~19.48%. The stock has a 52-week low and 52-week high of AUD 1.880 and AUD 2.840, respectively, and is currently trading below the 52-week high-low average. SGF was last covered in a report dated ‘7 December 2023’.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 18 January 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual’s appetite for upside potential, risks, holding duration, and any previous holdings. An ‘Exit’ from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

Kalkine New Zealand Limited is a Financial Advice Provider (“FAP”) and is authorised by a Class 1 Financial Advice Provider Licence issued by Financial Markets Authority (“FMA”) to provide financial advice. Kalkine provides only general financial advice through its research reports following a person becoming a member. The reports contain buy/sell/hold and other recommendations in relation to equity financial products. The recommendations and opinions [on this website] / [in this report] do not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions. If you act on the advice in the research reports, you may have to pay fees, expenses or other amounts (but not to Kalkine).  Further information about the complaints and dispute resolution process, as well as information about Kalkine’s duties are available on Kalkine’s website.  Please read our Financial Advice Provider (FAP) disclosure statement and Complaints Handling Guide, which are available on the website.