A strong half of lottery retailing fed into a good result for Jumbo Interactive with industry ticket sales booming.
TTV (total transaction value) in 1H22 jumped 38% compared to last year and this drove group EBITDA up 17% to $28.2 million (lottery retailing EBITDA $15.8 million), well ahead of what the market had been expecting. In fact, we think JIN may have taken some market share from Tabcorp during the period.
There were 23 Powerball/Oz Lotto jackpots greater than $15 million during the period, compared to 15 last year.
This week’s $120 million Powerball jackpot sits among the pantheon of big prizes in recent lottery history and, as usual, there has been no shortage of people chasing the dream. The intoxication of a life-changing lottery win brought in almost 200k new players in 1H22, up 41% on 1H21. Oz Lotteries data shows just over 836k active players in the 12 months to 31
December 2021, an increase of 15% over the previous year.
The second half year will bring an important change to the Oz Lotto game which will increase the number of balls from 45 to 47 and add a third supplementary ball. The effect will be bigger and more jackpots (what customers say they want) to Division 1 but without diluting the win rate in Divisions 2 to 7. It will also bring ticket price rises of 5c per game for JIN (TAH increase is 10c to the $1.20 game price).
Together with the latest big Powerball jackpot, which itself will add high single digit percentage incremental growth, we can see 2H22f TTV increasing by more than 1H22 (38%).
Investment view
JIN is a pure play online lottery retailing business and this sector is gaining plenty of attention as the Tabcorp demerger of its lottery business approaches in June this year. That event, and the information coming from it, will serve to highlight the excellent value in JIN and its model.
Other catalysts appear in the form of the Oz Lotto game changes due in May. This will create more good noise around the profitability of lotteries and JIN is a direct participant in that.
JIN has also made a couple of acquisitions in its Managed Services business that can add value in due course. JIN could add further charity or government customers in the UK and Canada. This business could expand into the US lotteries industry.
The negative share price reaction to the result did not make sense, in our view, and presents an opportunity to buy stock in this emerging company.
Risks to investment view
The regulation of lotteries could potentially change although this is a relatively mild part of the gaming sector. Demand might also change if consumer confidence falls or competition impacts on established products. JIN’s reseller agreement with TAH could also change.
Recommendation
We have retained our Buy recommendation.
