Jumbo sold off today on results. Not sure why, from my perspective the result was great. Maybe the price was a little overvalued, but i disagree with the market if that is the case. The broad trend of more and more lotteries being sold online and through apps is continuing, which jumbo show some stats which point to this.

Rev increased 29.1% but NPAT only increased 24.7%. Margin compressed due to higher tabcorp fee (which shouldnt be a suprise to the market, it was part of their renegotiated deal), higher marketing spend, and higher employee expenses.

All three main segments showed some strong growth. There was a pick up in the number of jackpotted lotteries in the last half comparatively to pcp. This has continued into the second half here in australia, so ticket sales should continue their strong trajectory.

A good result in my opinion, and i may look to add more if the stock continues to sell off (dependant on other opportunities)

1Q FY22 trading update

• Overall revenue increased 19.7% pcp
• Gross Profit increase 14% pcp despite increased tabcorp fee (from 1.5% to 2.5%).
• Lottery Retailing up 18.4% pcp
• SaaS revenue up 9.9% pcp
• Managed Services revenue up 47.8% pcp

Another solid quarter for Jumbo. They aren’t shooting the lights out, but all areas of the business heading in the right trajectory.  

Im calling it now that their previously targeted $1b TTV in FY22 is impossible. Based on the quarterly update and factoring in 50% of the forecasted TTV of Stride, I believe they can achieve $650m+, which is still good growth from the $487m they achieved last year. Revenue should crack the $100m mark this year which would be close to 20% growth on last year.

I don’t mind the acquisition strategy getting a foot in the door in other geographies with large addressable markets. But I would like to see more emphasis and sales in their SaaS offering as I believe there is a growth ceiling on their re-selling business (I don’t think they have reached this yet).

Jumbo announcing they will be acquiring Stride Managment Inc, which for $11.7m cash (70% on completion and 30% to be paid in 2 x installments in FY22 & 23, subject to earnings hurdles being met). I dont know much about Stride and will have to do further research, but the numbers Jumbo are touting in their announcement sound promising. It also plays and ties in nicely with their global expansion strategy. Hopefully this gives them a foot in the door in Canada to show off their SaaS offering.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02412305-2A1318463?access_token=83ff96335c2d45a094df02a206a39ff4

Tabcorp selling their entire stake is definitely not a good thing. Im not so sure its a bad thing. It wasnt part of my thesis or the reason i invested in the first place. So i may see where this sell off lands and the share price settles, as it could present a buying opportunity at discounted prices. 

Given that the two companies now have a ten-year agreement in place, Im not overly concerned.

If management’s international expansion plans for its Powered by Jumbo software as a service (SaaS) business. Dont track as planned, then i will look at selling. Ill assess this as results come to light. Im not sure if foreign govt regulations will hinder this, they are just providing a platform? Happy to be proven wrong on that, i need to do more research.