Tabcorp Holdings (ASX:TAH) likely faces remediation costs in a new regulatory enforcement investigation, and repeat offender status is also a risk, but neither of those factors justifies the magnitude of the sell-off in the company's stock, Jarden said in a Thursday note.

The Australian Transaction Reports and Analysis Center (AUSTRAC) is investigating the company's compliance with anti-money laundering and counter-terrorism financing obligations, citing concerns about its ability to identify and mitigate risks.

Jarden noted there is no certainty of a financial penalty as the regulator's disclosure stated that all outcomes are on the table, while previous cases show that a zero-penalty result is possible when the regulator is satisfied with cooperation.

AUSTRAC's previous gambling sector penalties have ranged from zero to AU$450 million, the equity research firm said, adding that it views top-line implications for Tabcorp as limited.

The company's shares fell sharply after the disclosure of the probe, and at those levels, "the stock appears to be factoring a cost impost well in excess of what the precedent set supports," Jarden said.

It maintained an overweight rating on Tabcorp with a target price of AU$1.05, saying it will revisit those assessments if Austrac files civil penalty proceedings or Tabcorp takes on provisions related to the case.

The company's shares fell 13% in recent Friday trade.