Jumbo Interactive Limited

JIN Details

Company Overview: Jumbo Interactive Limited (ASX: JIN) is involved in selling official government and charitable lottery tickets through the Internet and mobile devices. Its segments include Lottery Retailing, Software-as-a-Service (SaaS) and Managed Services.

Business Update: The below picture represents company’s business recent updates:

Business Updates, Analysis by Kalkine Group

1HFY22 & CAGR Financial Highlights:

• Revenue Front: The company has grown a CAGR of ~27% on revenue front from FY17 to FY21 at $83 million revenue in FY21. Its 1HFY22 revenue was reported as $53 million with an EBITDA of $28 million (~35% CAGR growth from FY17).
• Balance Sheet Position: The pro-forma figure of cash balance at the end of 31^st December 2022 was reported as $69,855 million.

Key Risks and Challenges: The company might face integration risks related to the acquisition in talks. Besides, it might face the repercussions related to non-compliance of the legal circulars and regulatory changes.

Outlook: With the $487 million of TTV (Total Transaction Value) (2.7x increase in the last 4 years), JIN has a large growing and underpenetrated serviceable Total Addressable Market (TAM) of $685 billion with $10.3 billion as Serviceable Available Market (SAM), where the company bifurcates the expectations into 50% of SaaS, 30% of Managed Services and 20% of Lottery Retailing.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

The stock of JIN gave a negative return of ~14.45% in the past one year. The stock is currently trading near its 52-weeks’ lower levels of $13.250. The stock has been valued using the Price/Earnings multiple based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). Considering a high margin business model, the company can trade at a slight premium compared to its peer’s average. For valuation purposes, peers like Ainsworth Game Technology Ltd (ASX: AGI), Betmakers Technology Group Ltd (ASX: BET), Aristocrat Leisure Ltd (ASX: ALL), and others have been considered. Considering the favourable positive margins, financial position for capital management, effective acquisition, rising revenue and decent CAGR, and upside indicated by valuation, we give a ‘Buy’ rating on the stock at the closing market price of $13.610, up by ~0.964% as of 20^th June 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

JIN Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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