Attached to this straw is the valuation detail and below a walk through of the reasoning.  The main valuation has general information on the company as it currently stands.

Disclosure: I have held JIN since mid-2020 at an average cost of $10.75 and am continuing to hold at current prices.

Bull IV = $43.42 ($686m FY30 Revenue)

Base IV = $15.29 (Valuation)

Bear IV = $6.51 ($33m FY30 Revenue, due to non-renewal of Tabcorp agreement in 2030)

Valuation Assumption (Base):

·         Sales Growth (12.3% CAGR): Driven by new SaaS and Managed Services business growth from low to nil base in FY20, with modest (6.5% CAGR) Lottery Retail business growth. FY30 revenue breakdown is 134m/54m/38m for Lottery/Saas/Managed Services.

·         Margins: Maintained in line with H1 FY21 for each business unit except for Lottery which has the impact of the increased Tabcorp fee which tops out at 4.65% in FY24.  Because this is calculated on TTV, the margins impact is -22.8% Vs pre fee margins.  Note that margins for the SaaS and Managed Services business are currently not clear, so margins may need to be reviewed when clearer details are available on these.

·         EBITDA%: As with margins I have retained these % by business unit (adjusted for the Tabcorp fee), so the overall impact is the result of a change in the ratio each contributes.  Note that I would expect that as sales scale up, operating leverage would improve EBITDA%, but I have left this out at this time due to the lack of margin clarity.

·         Capex: This is almost entirely intangibles and I assume investment continues to grow at 10% a year to maintain competitive advantage.

·         Share Count: Assumed a 1% growth from ESOP’s which seem reasonable.

·         Discount & Terminal value: Taken market risk of 10% (long term average), terminal value is calculated as a multiple of EV/EBITDA of 10, which is around a P/E of 16 and perpetual growth rate of 3%.

·         Risks/Options: No discount for risk due to high cash balance and solid underlying FCF positive business to 2030.  Options premium of 20% based on the benefit of potential acquisitions (US), cross selling of SaaS and Management services opportunities and new product optionality.

Comment on Valuation:

·         The base valuation is around current prices and gives some insights into what has been priced in by the market, this is deliberate and acts a bit like a reverse DCF. 

·         My preference is for the Bull case, the very large TAM offered by the new SaaS and Management Services businesses offers much higher growth opportunities and ones which the market is yet to accept.

·         The elephant in the room is the Tabcorp agreement which finishes in 2030.  If it is not renewed and the growth rates are below Base assumptions, then you are left with the Bear case.  The value of the Tabcorp agreement alone being renewed is worth around $5 to the current valuation to provide some context.

·         JIN needs to continue to innovate and adapt to remain relevant, the new SaaS approach is central to it’s future market beating value and having the founder in place to lead it is going to be an important part.  The investment thesis rests heavily on this.