Endeavour: Market Overreacts to Victoria’s Tightening Gaming Legislation

We forecast the proposed gaming restrictions unveiled by the Victorian government to weigh on Endeavour’s EDV long-term earnings. However, we estimate the impact on the group’s intrinsic value to be less severe than the market anticipates—considering the 10% decline in Endeavour’s share price on the back of the news. While we also expect New South Wales to follow suit, we estimate the combined decline in earnings at a relatively moderate 7% from fiscal 2025, with the valuation impact partially offset by the time value of money. We lower our fair value estimate on Endeavour by 5% to AUD 6.10 and shares screen as undervalued. We expect Endeavour’s larger retail segment—accounting for about 60% of group earnings and underpinning its wide economic moat—to be unaffected to changes in gaming regulation. Endeavour’s management hasn’t provided quantitative guidance on the impact of the Victorian reforms.

We ascribe a very high likelihood that the friction introduced by reforms will reduce Endeavour’s gaming revenue. We expect NSW to implement more stringent gaming legislation too. However, only some 10% of Endeavour’s electronic gaming machines, or EGMs, are in NSW compared with about 40% in Victoria. Queensland and South Australia already have relatively low load-up limits at AUD 100, and we don’t expect these states to materially tighten EGM regulation.

The Victorian reforms are extensive. By the end of 2023 they will introduce mandatory precommitment and carded play linked to patrons’ identities, as well as new load-up limits. Currently, Victoria’s precommitment scheme, YouPlay, is voluntary; two types of existing cashless gaming exist, but game with cards isn’t mandatory, and the load-up limit is set at AUD 1,000.