The company recently provided its earnings guidance for the year ended June 30^th 2015. The company forecasts revenue to increase from $24.1 million to $32 million. Profit is expected to drop slightly due to a loss of $3.6 million from the first full year of operation of the German business. Continued strong growth in the Australian lottery business has driven TTV (Total Transaction Value) and Revenue to record levels. The Australian lottery business continued to grow driven by continued investment in proprietary technology and marketing, which has resulted in a good increase in the customer database size and jackpot activity during the financial year.
 
The company is currently in expansion mode and has operations in Australia and Germany and is pursuing opportunities in USA, Latin America, Asia and Europe. The internet has brought positive change in the lottery business with some countries already showing strong sustainable growth as a result. However the vast majority of national lotteries are still at the cusp of this adoption and it is Jumbo’s belief that most will join the revolution in the next few years. Jumbo’s goal is to be at the forefront of this growth trend. With experience dating back to 2000 when Jumbo sold its first lottery ticket on the internet, Jumbo is uniquely positioned to partner with any national lottery around the world.


Jumbo Apple Watch App (Source - Company Reports)
 
The company achieved its goal of being connected to 16 German states by 2014. It is the only e-reseller in Germany with in-house connections in all these states. The focus has now shifted towards marketing and building the customer database to reach sustainable profitability. With an estimated 6.4 million lottery players going online by 2020, the market is sufficiently large to achieve this. The other factors contributing to growth in Germany are catch up from previous years of overtly restrictive regulations, advances in multi jurisdictional games, increasing lottery participation rates and clamp down on unregulated internet lottery e-tailer.
 
The company announced its goals to enter the Mexico market in 2012. Partnership with Sorteo games was terminated in March 2014. The opportunity in Mexico remains significant so efforts were made to find another solution. The management is hopeful of another launch in the year 2015. In USA, the legislative progress to allow more states to sell lotteries online has been moving forward, albeit at a slow pace. Jumbo has been actively helping a number of state lotteries convince their state legislators that internet lotteries are in the best interests of the state. Management remains optimistic that more states will permit online sales and that Jumbo can develop a good business in partnership with those state lotteries.
 
The company is also making its product available across devices. Jumbo is the only Internet lottery company with a platform fully developed in-house and is therefore able to keep pace with the rapid advancements on the Internet. Five years ago, 100% of Jumbo’s customers bought their tickets via a web page sitting at a desk. Today 39% of all customers are now buying tickets on their phone, on the move or relaxing with friends. The phenomenal growth of internet-enabled mobile devices now means customers can be alerted to upcoming draws in time to buy their tickets. Then after each draw another alert is sent with the winning numbers and prizes. Jumbo has led the industry in apps for both Apple and Android devices and continues to invest in research and development of new features.


Jumbo Daily Chart (source - Thomson Reuters)

 
The unique e-retailer system enables traditional retailers to participate in Internet sales and grow in-store foot traffic simultaneously. Jumbo understands the importance of existing traditional retailers and has created a harmonious business model, which addresses the many issues, these retailers face as well as the convenience on the Internet, that customers demand. Jumbo is also developing more products designed for social media to stay at the forefront of this worldwide trend.
 
The company achieved impressive sales numbers in 2014, despite a decline in the industry numbers. In 2014, Australian jackpots did not reach the same level as in 2013 which was the year that had the record $100 million OzLotto jackpot. Despite this 18% decline in jackpots, sales on company’s flagship website “www.OzLotteries.com” still managed to improve 4% and customer accounts increased 10% to 1.72 million.
 
The company is currently trading at a stock price of $0.99. The company has a market capitalization of 44.6 million and 44.2 million shares of the company are currently trading in the market. The company is currently trading at a Price to earnings ratio of 45 and a price to sales ratio of 1.6. Price to book ratio of the company is 2.1 and price to cash flow ratio of the company is 43.8.
 
Given the exciting international growth prospects of the company, we believe that the stock is a buy at the current price of $0.99.

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