Four companies to watch as the global tennis tournament heats up

The Australian Open is the first of four Grand Slam tournaments (French Open, Wimbledon and US Open) this year, starting the global competition. For the event's 24 sponsors, this is the first opportunity to take their brand and company to new heights, especially given the fact that the atmosphere in tennis is heated after last year's women's final, whose television coverage attracted a record number of viewers.

Australian Open and sponsors

For investors, it is worth spending some time with one of the biggest sponsors of this tournament listed on the stock exchange. Although the Australian Open closes on January 29, the most engaged companies expect their profits and results to increase significantly due to TV replays, media mentions and photos on the Internet. So it's worth keeping an eye on some of these companies to see how they'll potentially benefit, especially before quarterly, semi-annual and annual results are released.

Some entities disclosed that the Australian Open affected their financial results, others did not. Therefore, we analyze what may be worth paying attention to. However, we know that investors can expect sponsor companies to see profits and results increase in 2023, especially considering that they are participating in the first global round of tennis tournaments since the Covid lockdowns.

Here are a few companies to watch for this year's global tennis tournament:

Hyundai (000270)

As the main partner of the Australian Open, it is hard to miss the company's branding both on the court and in advertisements broadcast during tennis matches. Kia has reportedly signed a US$107 million deal with Tennis Australia, extending its twenty-two-year partnership until 2028. This is the most expensive sports sponsorship deal in Australia's history. The deal includes cash of approximately $21,5 million per year, as well as the provision of 130 Kia cars to competitors and members for transportation from the airport to Melbourne Park and other locations. Ten of these vehicles are electric.

However, investors may be asking themselves: how will this affect the development of Kia? Well, it can increase sales, but what will be most closely watched is the increase in profits and cash flow. Overall earnings and bottom line growth is widely projected to be similar to 2022. This is because, as noted above, we believe markets will primarily favor metallurgical companies, perhaps even more than electric car makers and prices, including copper, aluminum and lithium seem to be supported in a way that will ensure further growth.

Ralph Lauren (RL)

It is the official clothing brand of the Australian Open, which means that it dresses all representatives of the organization present on the court, as well as ball children, linesmen, referees and management. It is estimated that Ralph Lauren paid USD 2023-6 million for sponsorship in 7. Ralph Lauren expects the fact that the Australian Open reaches 900 million households daily in more than 215 countries and territories around the world will help establish the brand among tennis fans, as well as contribute to the brand's ongoing quest to create "sporting elegance".

Let's ask ourselves: how many consumers will this lead to going out to buy Ralph Lauren clothing in 2023 when interest rates go up? The problem is that most of RL's revenue comes from America and Europe - both of which are struggling with rising interest rates. On the other hand, 21% of RL's revenue is generated in Asia, so with China's economy expected to provide fiscal stimulus as the economy reopens to the world, sales of RL products in Asia could increase. In 2023, it is widely assumed that Ralph Lauren will report an increase in profits of 16% and an increase in gross profit of 65%. The problem is the pressure of higher interest rates and wages on the company's balance sheet, but the fact that cotton prices have fallen by 25% compared to the high in August is working to the advantage of RL. So we'll see how much their costs go down.

Mastercard (MA)

It is the official payment partner of the Australian Open 2023 and has sponsored the tournament for 17 years. Mastercard logos are located on the courts and throughout the facility, as well as the logos of the main sponsor - the Kia brand. Mastercard also operates checkouts in retail stores on the premises, and conducts customer activation activities there.

It is not known how much money has changed hands under this partnership, however, with rising interest rates, 2023 is projected to be more favorable to Mastercard's revenue and revenue. The consensus view is that in 2023 profits are expected to increase by more than 60%.

Nine Entertainment (NEC)

It is the broadcast partner of the Australian Open (AO) and broadcasts the event. Nine will remain so until 2029. The Australian listed company earns AO USD 85 million per year, and the value of the contract valid until 2029 is reportedly over USD 425 million.

In 2023, Nine essentially generates 53% of its total broadcasting revenue. After the return of advertising dollars since the end of the pandemic, this company's financial result is expected to increase by as much as 2023% in 82. However, if the Australian Central Bank - Reserve Bank of Australia – will start to cut interest rates later this year, as is widely expected, Nine's financial result may only increase slightly.

Author: Jessica Amir, market strategy specialist, Saxo Bank