@tomsmithidg Yes I was also wondering about the impact of economic hardship also.

I asked GPTChat if there was any research on the impact of economic hardship on gambling. It referenced this research paper: https://pmc.ncbi.nlm.nih.gov/articles/PMC5524821/?utm_source=chatgpt.com and summed up as follows:

Academic studies looking at past recessions (e.g., around 2008) found that:

• Participation in some forms of gambling can increase during economic hardship — especially lotteries and low-stake games — possibly because people experiencing financial stress are drawn to the small cost and chance of a big win. Individuals reporting financial difficulty were significantly more likely to buy lottery or scratch tickets during the recession compared to those not financially affected.  
• Casino gambling expenditures tend to stagnate or shrink during recessions because casinos are relatively expensive and discretionary; casino revenue growth slows or declines during downturns.  

Summary from long-term data:

• Lottery consumption often proves recession-resistant — it doesn’t drop much and may even rise.
• Casino gambling is more pro-cyclical — it grows when the economy grows and stagnates or shrinks when incomes fall.
• Other forms like pari-mutuel wagering may decline in tough times.  

Economic Hardship Can Be Linked to Gambling Upticks

Some studies show that people who experience financial difficulties during downturns are more likely to engage in gambling behaviors, even when overall gambling participation doesn’t change much. For example:

• A population-based study found those affected financially by a crisis were more likely to increase lottery play — with low stake and high jackpot games seen as potential ways to improve finances despite risk.  

Re 1H2026, I thought the first 4 months looked positive. I’m wondering where you read “11.38% down at 31 December half year”. I haven’t noticed any trading updates this year. The last update announcement I could find was on 11 November 2025 which was looking positive for the first 4 months of 1H26:

• Lottery Retailing TTV up 5.2% to $142.4 million
• revenue up 12.5% to $35.3 million
• SaaS TTV up 9.0% to $87.5 million, revenue up 8.1% to $3.4 million
• 
Managed Services TTV up 13.1% in the UK, 10.8% in Canada
• Dividend payout ratio revised to 30%-50% of statutory Group NPAT
• FY26 underlying EBITDA contribution from DCG UK: £7.0-£7.3 million, DG USA: US$2.7-3.0 million

• One-off transaction costs of ~A$3 million for acquisitions

I note here that the dividend payment policy has changed with Jumbo intending to retain and reinvest 50% to 70% of its earnings. If Jumbo can continue ROE above 30% this will significantly increase its valuation. Using McNiven’s valuation formula and assuming 50% of earnings is reinvested the valuation lifts from $10.00 to $12.50 per share (requiring a 12% annual return).

Hey @Rick thanks for your posts on JIN. In relation to your vulnerabilities, my thoughts on potential risks are on the follows:

• The speed of repayment of the $120m debt facility to fund the two acquisitions this year
• Unknown things under the hood of the two new businesses (similar to what happened with other recent acquisitions)
• Giveaway market does not achieve anywhere near the expected growth targets
• Continued price increases (on top of TLC price increases) push users to the use the competition platform
• TLC not winning the Victorian lotteries renewal in 2028
• Regulations impact the overall margins of the giveaways that can be achieved
• Unfavourable timings of the jackpot cycle (this is only a short term price impact)
• Interest rate increases/recession (low risk right now)
• Continued relationship between JIN and TLC post 2030 with the new CEO coming on board

While they might not all be likely or significantly impact the business, they are still in my mind when considering the valuation. I have put the more likely/higher ones near the top of the list

I've also run it through the McNiven and still get the same $10-14ish range depending on how aggressive a return (10-12%) I am seeking.

@tomsmithidg - On top of the stats provided by Rick above, there's a good image in the Presentation to Macquarie Australia Conference 2024 which shows the impacts of previous recessions on the Australian lotteries market. I can appreciate that JIN are in UK and Canada, which might have some different impacts should we another global recession occur in the future. The unknown for me right now is how the giveaway market will react in a downturn.

@SudMav i really appreciate your view on the potential risks. I’m new to the business and I’m still researching what can impact future earnings. So far I like what I see, but I’ll be looking more closely into your list of potential risks. Nice to see you get a similar valuation using McNiven’s. What percentage reinvested earnings are you using? It makes a huge difference compared to the previous dividend policy. This along with the on-market share by-back are excellent use of capital in my view.

G'day @Rick , sorry mate, looks like I misread a Morningstar Report, that was for 31 December 2024 not 2025. (#oldeyes)

Thanks @SudMav , I do love a graph. @Rick , that dividend change could hurt share price in the short term too if holders for earnings (like me) divest themselves due to the reduced cash returns.

That’s true @tomsmithidg. A lot of investors don’t realise that high ROE businesses create much greater value for investors by reinvesting a significant portion of their earnings back into future growth. Of course this is only beneficial if the reinvested capital continues to generate very high returns on shareholders equity. Shareholder equity and earnings will grow at a much higher rate and the share price should follow suit. The cash returns will be there, but it takes time for the compounding of shareholder equity and earnings to take place. The dividends should also grow proportionally.

Hey @Rick welcome to the party. There's some really good content in the Reports for the company, and i have also got a lot from conversation with @Karmast over the past year.

My inputs in the McNiven were a 10-12% return from a ROE of 22% (which is based on an NPAT of 50m), div payout ratio of 40% of an estimated 40c annual dividend and an estimated equity of $230m. I am waiting for the official financials to come out before I tidy up my valuation range.

@tomsmithidg - i would much rather the smaller dividend and they pay down the debt to improve their financial position, than keep the dividend the same and pay more money to ANZ in interest.

JIN interestingly re-commenced their buyback late last year before the pause period, which means that the leadership team do see some value at the current price.

The reduced dividends should only be temporary (3 to 4 years is my guess), as they pay down the debt they took on for the two new businesses they acquired late last year. Mike doesn't like debt but did like both those businesses a lot. So, their stated intention at the AGM was to pay down the debt promptly by reducing the payout ratio for a while. A wise and appropriate strategy in my view. It's reduced the concentration risk of the TLC contract a bit more and should see double digit earnings growth returning for at least the next few years.

Thanks @SudMav not all buybacks are in shareholders best interests. This one is, and I don’t mind some debt providing ROE stays above 30% and their acquisitions have a high return on invested capital. ROE dilution is a risk with new acquisitions.

JIN a long time between drinks (17/3/26)

I held Jumbo for a little over 2 years up to August 2022, selling partly due to cash demands but also an underlying concern about the longevity of the Lottery business (ie 75% of revenue) and it’s deteriorating contract terms.  I sold at $14 for a ~40% return, so I parted on good terms with Jumbo, but I have not looked back since.

Today I had another look, prompted by @Rick’s & @SudMav’s work of a few months ago and an Intelligent Investor (II) article. Yikes, a PE of 10 and at $8 a share I figured I needed to review my prior assessment to see if there was value. A summary of the II article is below, it’s not flattering, but at the current price, it still warranted a look, sometime II go off the deep end and miss good opportunities.

In reviewing I got stuck in a few rabbit holes, so I will cover these which is as far as I think I am going to go for now with JIN because I still have strategic concerns and if anything these have increased (see article) along with the number of moving parts to make value even harder than it was (my 2021 valuation had a ridiculous range) these are some points of interest I found:

• H1FY26 with 2 months of acquisition impact, expenses have exploded… up 50% (21.4m) from 42.6m to 64.0m while revenue is up just 29% PcP, according to the FY26 outlook ~A$3m of M&A transaction costs were expected but H1 had $5.3m in one-off adjustments to underlying EBITDA, 2m of it is amortisation (see next point), advertising and marketing has almost tripled which explains most of it but Employee and other costs add almost 3m each as well. The acquisition additions are much of the reason I suspect but it’s too messy currently to have any idea on how costs are moving.
• NPAT is dead (and hence PE), long live EBITDA… Intangibles have increased from $69m in FY25 to $243m! The amortisation of the Customer Contracts balance additions added $2m in amortisation expense in 1HFY26, but that was just 2 months I believe, so expect an additional $12m in amortisation expense in FY26 Vs FY25. This P&L expense will not be tax deductible, so the impact will go straight to NPAT. The Goodwill which is almost as large a balance is not being amortised, or this would be a bigger impact – but watch out for any “fair value adjustments” to Goodwill down the track, so this may also be a $96m NPAT bomb at some point.
• Another near-term impact to NPAT (and EBITDA) is going to be financing costs, which should be obvious given the change form net cash to net debt with the acquisitions and diminish over time. However, for context 1HFY26 had ~$1.8m of additional finance costs vPCP, so again, if this was 2 months then we will see ~$10.8m PBT impact in FY26 Vs FY25, or ~$7.5m after tax NPAT reduction.
• Comparing the FY24 to the FY25 & H1FY26 results presentation it is remarkable how the focus on numbers and informative charts and graphs has reduced, replaced with smiling people and wordy strategy diagrams that any management consultant would be proud of.

So, the key takeaway is that the current PE is mostly useless as a valuation tool without care to adjust for changes which are also relevant for comparative to previous PE’s the company has traded at. The change in balance sheet risk is one reason, the financing costs which will also impact earnings is another, both will resolve over time but non-cash amortisation costs is going to muddy the PE due to it’s significance to the P&L and will be around for many years. As always cash flows will provide a better view of performance and expect a lot of “underlying” and EBITDA focus by management.

II Article Summary (by AI):

Jumbo has shifted from low-risk lottery reselling into owning prize-draw businesses in the UK and US, which adds complexity, volatility, and leverage.

Key points for an investor:

• Core strength is digital lottery infrastructure and marketing, not owning prizes and inventory.
• New prize-draw acquisitions are outside this competence and in highly competitive, lightly regulated markets with 400+ UK operators.
• Prize draws require sourcing prizes, funding campaigns upfront, and managing fulfilment, making margins more volatile.
• Regulatory risk increases across multiple jurisdictions and advertising regimes.
• FY25 interim: revenue up 29%, NPAT up 23%, but mainly from acquisitions; Australian underlying EBITDA down 3%.
• Fewer large jackpots, flat ticket sales, 21% fall in active players, and slight market share loss despite higher marketing spend.
• Balance sheet weakened: moved from net cash of 80m to net debt of 49m to fund deals.
• Still heavily reliant on The Lottery Corp agreement, with renegotiation due by 2030.
• Analyst ceases coverage, viewing risk-reward as unattractive despite an 11x 2026 PE.

Disc: I don’t own, unlikely to own unless the price falls significantly from here.

Ripper writeup @Tom73

I still think their lottery income will mean revert as there have been a few good Powerball jackpots already this quarter, but your post raise similar things to what keeps me worried about the longevity of this one

your comment re management consultants made me laugh so much I spit my coffee out hahah :)

Cheers @SudMav , spitting my coffee is a common reaction I have to management consultants in general.

I agree with you and think the lottery income will mean revert, the number of jackpots will normalise, but this is not my problem with the lottery income. It’s what happens in FY30+ and the fact it could drop to zero because they don’t control it.

So cashflow forecasting (DCF) is going to be impacted by this risk to the terminal value (value year 5+). Terminal value usually accounts for ~80% of total value, so this would have to be discounted by the risk of loosing the lottery business. What %? I don’t know but it’s well above 0%.

This plus the fact the market will likely view the impact to PE from non-cash amortisation costs as a negative means that there is a lot of downside price risk, well that’s how I see it. The upside rests on parts of the business that are new and unproven. Sure it could go really well, but I just don’t see the odds in the favour of investors, hence it’s not a good asymmetric bet to me.