JUMBO Interactive positioned for growth
- Company aims to reach A$1 billion in ticket sales by 2022
The world’s best-performing gaming stock is winning big as more lottery hopefuls buy their tickets online.
Younger people “are not really interested to buy a lottery ticket at a normal newsagent,” Jumbo Chief Executive Officer Mike Veverka said in a phone interview this week. “Even some of the older demographics that are used to going into a store to buy their lottery ticket prefer to buy it online.”
Lottery and scratch tickets are the most popular forms of gambling Down Under, according to a Roy Morgan study published earlier this year. About 40% of Australians aged 18 and older bought either ticket type in an average three-month period during 2018. In-store ticket sales are increasingly being replaced by the digital market, said Adrian Ezquerro, head of investments at Clime Investment Management Ltd. About 25% of Australian lottery tickets are bought over the Internet, more than double the amount of tickets sold online three years ago.
No Competition
Jumbo started as an online retailer that sold various products, including tickets to an Australian charity lottery. As demand for those tickets grew, Veverka, an engineer, realized that selling lottery tickets over the Internet could be profitable.
“There wasn’t really anybody doing it,” said Veverka, who refocused the business around 2005. “It was something that didn’t have to be delivered physically, it was repetitive and something that the Internet really added a lot of value on.”
Winner, Winner
Jumbo is the world's best-performing gaming stock of 2019
Source: Bloomberg
NOTE: Rankings among BICS Casino & Gaming stocks worth at least $100m; gains as of Nov. 13
The next boost for earnings will come from growth in the overseas markets after net income hit a record high in the first half. The company recently announced its entrance into the U.K. market with the acquisition of online lottery platform Gatherwell Ltd. U.S., the world’s largest lottery market, also provides potential, Veverka said, adding strict state and federal regulations are keeping most lotteries offline for now.
Morgan Stanley in a note this week maintained its overweight rating on the stock, citing its ability to bring lotteries online and potential to take its software to charity lottery markets abroad. The journey is not without risks. Regulatory change, management churn and lack of near-term jackpots could all hurt its growth, the bank said.