Jumbo Interactive – Jumbo numbers result in Jumbo upgrades

About the author:

James Lawrence
Author name:
By James Lawrence
Job title:
Analyst
Date posted:
20 August 2018, 1:19 PM
Sectors Covered:
Gaming, Professional Services, Fixed Interest

A solid set of numbers

Jumbo Interactive (JIN) reported a strong set of numbers which were above recent guidance and our forecasts (which sat above company guidance). Revenue of A$39.8m grew 21% on the previous corresponding period while the business continued to show excellent operating leverage with EBITDA margins increasing from 42.9% to 48.8%.

Active customers rose approximately 24% to a record 438,000, while new customer accounts increased by 215,000. Importantly client acquisition costs remained steady at sub A$18 per customer.

Charity lottery sales see continued strong growth

Charity lottery sales increased 60% to A$6.1m, and the company is expecting to add at least one additional charity in FY19 and anticipates continued good growth from this segment. While charity lottery sales only constitute approximately 3.3% of Total Transactional Value (TTV) they are a high margin product and rely on little spend by JIN to derive those sales.

Changes to forecasts

Following the particularly strong new customer and existing customer performances, as well as the excellent start to FY19 with 11 jackpots at or above A$15m (including Australia's first ever A$100m draw) we have made significant upgrades to our forecasts.

FY19 EBITDA has increased 24.7% to A$26.6m while NPAT has risen 31.3% to A$17.2m. Our Dividend Per Share forecast for Y19 has increased to 27 cents per share (up from 21.5 cents per share).

There are also sizeable upgrades to to FY20/21 in the order of +20% at the EBITDA level and +30% at the NPAT level.

Investment view

Jumbo Interactive (JIN) is trading on a cash adjusted FY19 PE of 17x and has a 4.6% dividend yield, both of which we view as attractive. Key upside risks to our valuation include higher traditional lottery sales in Australia, improved online sales penetration rates and the stronger uptake of charity lottery sales.

We have increased our valuation and share price target (Morgans clients can login to view) and retain our Add recommendation.

More information

Morgans clients can login to view our detailed report and share price target for Jumbo Interactive (JIN). Alternatively, please contact your nearest Morgans office for access.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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