About the author:
- Author name:
- By James Lawrence
- Job title:
- Date posted:
- 21 August 2017, 9:12 AM
- Sectors Covered:
- Gaming, Professional Services, Fixed Interest
A solid result given the jackpot environment
Jumbo Interactive (JIN) reported FY17 Total Transaction Value (TTV) of A$145.3m, down 5.2% on the previous corresponding period (pcp). We view this as a solid achievement given there were 14 fewer jackpots at or above $15m during the period. While the pcp was particularly strong from a jackpot perspective, FY17 saw just 31 jackpots which is below the average of the past few years.
Management noted that 2H TTV was 3.6% higher than the pcp even in the face of a 24% drop in jackpots.
Revenue down, profits up
Revenue of A$32.4m fell 4.9% and was in-line with our forecast of A$32.0m. Good cost control and lower marketing expenses, coupled with a larger contribution by the charity lotteries business saw NPAT from continuing operations increased by 3.7% to A$7.6m, ahead of guidance of A$7.1m.
Charity Lotteries strong
The Charity Lotteries division witnessed growth of more than 300% to $3.8m (vs our forecast of A$3.4m). The company continues to add to the product offering and we view this division as a key growth leg for JIN. Given there are few costs associated with administering the product, the vast majority of revenues generated fall through to the Profit Before Tax (PBT) line.
Jumbo Interactive (JIN) offers investors exposure to the traditional lottery market (and particularly the shift to digital sales channels) as well as the growing charity lottery business. Key upside risks include higher traditional lottery sales in Australia, improved online sales penetration rates and the stronger uptake of charity lottery sales.
JIN is trading on an FY18F PE of 15x, an EV/EBITDA multiple of 6.2x (after adjusting for players cash) and offers strong EPS growth over the next three years.
We have increased our share price target in line with our DCF valuation, and retain our Add recommendation.
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