How low can it go? Last week the AUD fell to $0.7099 USD, its lowest level in the last two and a half years.  The AUD recovered to $0.0721 prior to the opening of US markets on Thursday morning. The following chart from smallcaps.com.au shows the decline as of 17 August.

The AUD rallied again following the mid-September release of better than expected economic data here in Australia and renewed speculation a US/China trade war could be averted.  Although Australia has yet to be directly targeted by US tariffs, our interdependence with the Chinese economy is a cause for concern with some in the investing community. 
The Big Four Banks are forecasting flat to moderate changes in the AUD by year’s end, with NAB (National Australia Bank) the most optimistic with a forecast of $0.75 followed by Westpac at $0.73; Commonwealth Bank at $0.72; and ANZ (Australia and New Zealand Bank) predicting a drop to $0.70.
Others are not so sure, citing what some consider to be the key factor influencing the dollar’s rise and fall –interest rates.  Following the GFC the US Federal Reserve cut its Funds Rate to near zero to stimulate the US economy.  In Australia the RBA kept interest rates high, making fixed income investments in Australia more attractive for institutional and high net worth investors.  Now the RBA has moved in the opposite direction, cutting the Cash Rate to 1.5%, with expectations it will remain so.  The US Funds Rate is at 2% with another rate increase expected later this month and one more before year’s end.  Given the strength of the US economy there is some speculation the Fed could cut more.  Most experts agree the US Fed Funds Rate will hit 3% in 2019.
Seasoned investors are aware this is not the first-time market experts have lost their breath following a drop in the AUD, flooding the financial websites with articles touting ASX stocks to benefit from a lower dollar.
Conventional wisdom says ASX exporting companies will benefit since with the US dollar acting as the de facto global currency, their revenues are reported in US dollars.  There are hidden caveats in that view.  The ideal exporter would be one whose product is manufactured entirely in Australia and sold internationally, benefiting from lower costs of operation here.
Three stocks that regularly make those “top stocks to benefit” lists are CSL Limited (CSL), Cochlear Limited (COH) and ResMed Inc (RMD), since all derive much of their revenues from the US market.  Yet all three have manufacturing facilities in the US.
The second caveat is a favorable currency exchange rate does not always impact demand for the product.  It is highly unlikely new US consumers will be driven to the products available from those three companies simply because of the favorable exchange rate.
However, there are two sectors where the lower AUD is likely to increase demand.  The first is education – a product “manufactured” exclusively in Australia.  With English assuming the role of the international language of business, degrees from English speaking universities are seen as essential for many international students.   The US has led the field here but an education in a foreign country can be very expensive and the cost benefit of going to Australia over the US can be significant.
The second is tourism and leisure, another product “manufactured” exclusively in Australia.  This sector has the added benefit of dual tailwinds – one from international travelers and the other from domestic travelers.
The increased purchasing power of the US dollar makes Australia a very attractive tourist destination, with $USD 1.00 allowing the purchase of $1.39 of Australian goods and services.  For Aussies, the opposite is true, prompting Australian vacationers to consider domestic destinations and leisure activities for their holidays.
There is no guarantee investing in any stock that “could” benefit from a falling AUD will be a winner, no matter how low the dollar goes.  “Best of Breed” stocks with solid performance history and positive earnings growth forecasts are less risky investments.
The following table lists four ASX stocks to consider, ranked by market cap.

Tabcorp Holdings Group Limited (TAH) is a diversified gambling and gaming leisure entertainment provider with multiple brands.  The company merged with rival Tatts Group in December of 2017, a move attempted a decade ago but this time receiving ACCC (Australian Competition and Consumer Commission) approval.  The two companies were rivals with Tatts outperforming Tabcorp. Following Tabcorp’s ill-fated entry into the UK betting market, the company posted a $20 million-dollar loss in FY 2017, down from a FY 2016 net profit after tax (NPAT) of $169 million.  
If the merger was meant to help Tabcorp as well as create an $11 billion-dollar gaming and gambling behemoth, the FY 2018 Financial Results suggest it’s working.  The combined entity reported a profit of $28.7 million along with a 71% revenue increase, from $2.2 billion to $3.8 billion.
Locals and foreign tourists have access to electronic games and wagering in casinos and hotels across Australia.  In addition, customers and tourists can bet on thoroughbred, harness and greyhound racing through the internet, mobile devices, and the old-fashioned way – the telephone.  Tabcorp operates its own racing and sports radio network and offers keno and lotteries across Australia.  The company also offers a range of management and technical services to casino operators.
Crown Resorts Limited (CWN) operates fully integrated resorts, with two of Australia’s most popular entertainment complexes, one in Melbourne and the other in Perth.  An additional complex at Barangaroo on Sydney Harbour is scheduled for completion in 2021 at a cost of $2.2 billion. The complex has become the subject of a lawsuit pitting Crown against the NSW government over blocked harbour views, contrary to the original agreement reached.  Crown Sydney will be the first six-star hotel in Sydney.
Crown also operates a luxury casino in London, the Crown Aspinalls and is developing the One Queensbridge Project, an additional six-star hotel with luxury apartments as well connecting to the existing Crown Melbourne Entertainment Complex.
The company also operates an online betting exchange, Crown Digital, and a majority interest in a US social gaming platform. 
The company’s Full Year 2018 NPAT was down 70%, reportedly due to one off items but revenues rose 4.5%.  
Casino, entertainment, and hospitality operator the Star Entertainment Group (SGR) was spun off from Tabcorp in 2011, listing as Echo Entertainment Group.  The corporate name change is part of a rebranding strategy towards luxury entertainment complexes.  The company currently has three complexes – the Star Sydney; the Star Gold Coast; and Treasury Brisbane.
The Star Sydney includes an event centre entertainment venue as well as serviced apartments, a casino and nightclub, with an international designer retail collection.  Locals and international visitors alike can enjoy views of Sydney Harbour from the rooftop bar.
The Star Gold Coast is undergoing a $345 million dollar updating following more than 30 years in operation, once known as Jupiters Gold Coast.  Amenities are similar to those at Star Sydney.
Treasury Brisbane is a five-star hotel complete with restaurants, and the city’s only casino. The company also operates the Gold Coast Convention and Exhibition Centre and bested Crown in the bidding to develop the Queen’s Wharf Brisbane, an entertainment complex expected to be completed in 2022.
Star’s Full Year 2018 results showed a 5.5% revenue increase and a statutory NPAT drop of 44%, but on a “normalized” basis NPAT rose 20.3%. Casino and entertainment operators like Star and Crown cater to “VIP” customers, offering rebates.  Earnings results are adjusted, or normalized, to reflect average VIP win rates, which can be highly volatile.  Investors liked what they heard, giving the share price an upward bump.

Sealink Travel Group (SLK) operates as a tourism and transport company with a fleet of ferries and buses connecting tourists to major destinations across New South Wales, Queensland, the Northern Territory, Western Australia and South Australia, as well as a freight transport operation.  In 2017 the company entered the resort space with the acquisition of Kingfisher Bay Resort Group on Fraser Island.   Fraser Island is one of the top attractions in Australia along with Kangaroo Island and Sydney Harbour, both served by Sealink Ferries.  The company also offers day and extended touring along with charter services.  Lunch and dinner cruises are available in Sydney Harbour and Perth.
Sealink listed on the ASX in 2013 with the share price appreciating close to 200% over that period.

For FY 2018 Sealink reported record revenues but NPAT declined 7%.  Sealink has an analyst consensus BUY recommendation.  Star Group and Tabcorp have consensus OUTPERFORM ratings while Crown is at HOLD.

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