JIN - Jumbo Interactive

[System]

Jumbo Interactive Limited (JIN) was formerly known as Manaccom Corporation Limited (MNL).

Previous discussion of this company can be found in the MNL thread: https://www.aussiestockforums.com/forums/showthread.php?t=18589

 

[jtl]

Man, since its shares consolidation done under MNL or as JUM, as great as its profit margin is on the rising, I am still waiting for the share price to get up to 50c again where I will break even.. lol

JIN share price does seem to be undervalued considering it's last two years of annual profit increases but I guess with no storm like news but its prudent announcements, the market is feeling lukewarm toward it.

 

[decadon]

Hey JTL,

I've been holding this company for a while and also like the growth story. Sales have been increasing year on year and profit is following the same trend too. With dividends on the horizon it won't be long until the market takes notice of this stock again.

I think we just have to wait for half yearly and yearly profit announcements to come up with the goods to kick the sp along.

 

[decadon]

The share price has responded positively to the profit upgrade, looks like this company is starting to produce some good results.

 

[decadon]

JIN has announced an interim dividend of .5c per share. Looks like this company is well positioned for continued growth.

Based on the Internet lotteries division making an annual profit of 4.6 million and a p/e of 8 the share price should be around the 90c mark.

 

[skc]

JIN has announced an interim dividend of .5c per share. Looks like this company is well positioned for continued growth.

Based on the Internet lotteries division making an annual profit of 4.6 million and a p/e of 8 the share price should be around the 90c mark.

Their internet lottery business licence is only good until 2014. So you can't apply PE of 8 to that business. What you are buying for is ~3 years of $4.6m profit and some 'pseudo-option' that they will have their licence extended. Do your own numbers and see what JIN is worth with and without the extension, and trade/invest accordingly.

 

[decadon]

With sales fast approaching $100 million a year I find it highly likely that their license will be renewed. Such a fast and effective retailer selling their product they'd be crazy not to.

Sure there is a risk and any investor should be aware of that. A company like this should be left for the speculative part of your portfolio. But I am certainly enjoying the rise in the share price.

 

[skc]

With sales fast approaching $100 million a year I find it highly likely that their license will be renewed. Such a fast and effective retailer selling their product they'd be crazy not to.

Sure there is a risk and any investor should be aware of that. A company like this should be left for the speculative part of your portfolio. But I am certainly enjoying the rise in the share price.

I traded this stock last month but I couldn't find more details around the licensing issue.
Because it is so profitable / valuable, many people will like a slice of the pie. It may be the case that they will auction off the license... I have no idea. However, their customer accounts is their most valuable asset and that definitely gives them an inside track for license renewal.

You are definitely right about it being the speculative part and it is probably worth a punt. Good luck.

 

[decadon]

JIN closed at a 52 week high yesterday @ .43 on good volume (for JIN that is )

 

[Douglas]

Jumbo Interactive (Buffet would like this stock)

Jumbo Interactive (JIN) would be one Buffet would consider buying. They sell tickets for the Victorian and NSW lotteries online This year they forecast they will make 4 to 4.5 million dollars on sales of 75 million. The whole company is only selling for 17 million at 45 cents. They have 10.2 million in cash at the bank so its a pretty safe stock. They have the exclusive license to sell tickets in NSW until December 2013 and sell them with Tatts in Victoria. Its a great business because people want to make sure they buy their lottery tickets every week or miss out on their big chance to win. They have around 3 percent of the lottery market and sales are increasing every year as people move online to buy.

Its only selling at 4 X 2011 profit and is 45 cents, Carsales, Seek, Wotif, all trade between 18-25X. Put a 12X earning on this stock and it trades at $1.20. Its only a small stock and has been ignored by the market,with a solid results in 2011 and with 10 million in cash this stock should do extremely well.

Anyway, check it out, it should do well.

 

[Plumber1]

Re: Jumbo Interactive (Buffet would like this stock)

They have the exclusive license to sell tickets in NSW until December 2013 and sell them with Tatts in Victoria.

.

How long have they had these licences? And why hasn't the market factored these low P/Es into the share price?
When does their licence with Tatts in Victoria expire?

 

[Douglas]

Re: Jumbo Interactive (Buffet would like this stock)

How long have they had these licences? And why hasn't the market factored these low P/Es into the share price?
When does their licence with Tatts in Victoria expire?

The Victoran license expires in June 2013. The previous license ended in 2008 and was renewed for five years until June 2013. They picked up the NSW contract in Dec 2008 and it runs to Dec 2013. They have done a good job of selling tickets and hold all the customer details and technology to run the sales so it is likely they will have their license renewed again for both in 2013.

Good question about valuation, why only 4X, basically its undervalued but like anything there are reason. Generally companies under 50 million are not considered by institutions and dont get the exposure that larger stocks do. They also had another busines selling software which contributed around 10 percent of sales which they closed this year to focus purely on the online lottery busines. That may have clouded the picture for investors too. The profit for this year of 4 to 4.5 million includes the costs of closing this business. Anyway it is at an excellent price and has pretty good financials and future. I have been investing for a long time and that sort of combination doesnt come along often.

 

[Country Lad]

Re: Jumbo Interactive (Buffet would like this stock)

...............And why hasn't the market factored these low P/Es into the share price?................

Probably for 2 reasons, firstly because it was a dog for 30 years through all its iterations since Longreach Metals, particularly its period as JUM, then those rosy promises which were followed by the losses in the last 2 years ($11.7 million last year) which has no doubt led to a sceptical market.

The second reason would be that both the lottery licenses cease in 2013 with no guarantee that they will be renewed and there will be keen competition for those licences. Consequently the market has assessed the risk and hence the low P:E. Maybe JIN will enter into overseas agreements, maybe the Tatts and NSW agreements will be renewed, maybe Julia Gillard will win the next election, but there is no certainty and the risk is the reason for the low P:E. While those risks are there, the P:E is unlikely to change much.

JIN is probably a good example of there being a very good reason for some apparently good companies have a low P:E.

Cheers
Country Lad

 

[Country Lad]

.... and I would add that Buffet would not buy this one, even with your money.

Cheers Country Lad

 

[skc]

Re: Jumbo Interactive (Buffet would like this stock)

Its only selling at 4 X 2011 profit and is 45 cents, Carsales, Seek, Wotif, all trade between 18-25X. Put a 12X earning on this stock and it trades at $1.20. Its only a small stock and has been ignored by the market,with a solid results in 2011 and with 10 million in cash this stock should do extremely well.

Anyway, check it out, it should do well.

PE valuation methods = earnings into the future forever. A business that may have no business after 2013 should not be valued with a PE multiple. And for that reason, comparing JIN with these other internet plays is really quite wrong.

Like I said a few posts back - it's a punt on them revewing the licensces. You can beat the market only if you have some insight into how that process will pan out.

 

[Plumber1]

JIN has announced an interim dividend of .5c per share. Looks like this company is well positioned for continued growth.

Based on the Internet lotteries division making an annual profit of 4.6 million and a p/e of 8 the share price should be around the 90c mark.

It has dropped from 44c to 34c (about 25%) in the last three weeks. A long way from 90c.

Tatts is setting up an internet website to sell tickets in competition to Jumbo. My money is on Tatts to tear a hole in Jumbo's sales real fast.

 

[McLovin]

Re: Jumbo Interactive (Buffet would like this stock)

They have 10.2 million in cash at the bank so its a pretty safe stock.

That cash number is a bit misleading. Most of "their" cash is actually client cash from winnings yet to be paid out and deposits made by customers in order to buy lottery tickets.

 

[decadon]

JUMBO INTERACTIVE : 23 Aug 2011 2011
Preliminary Final Report results Full Announcement
ASX RELEASE – Tuesday, 23 August 2011 FY 2011 RESULTS

• 6th consecutive Record Revenue up 15% to $76 million
• Record Net Profit After Tax $4.8 million
• 0.5c Final Dividend declared bringing full year dividend to 1.0c
• Strong balance sheet with Net Assets $10 million

Leading interactive lottery business, Jumbo Interactive (ASX: JIN), today announced its 6th consecutive record Revenue of $76 million, record Net Profit After Tax of $4.8 million and also declared a fully franked 0.5c final dividend bringing total dividends for the year to 1.0c.

The result was due to the continuing growth of the Internet lottery market in Australia and overseas. Jumbo’s key asset, www.ozlotteries.com benefitted from significant in-house technological development with the release of the smartphone service m.ozlotteries.com and the customer loyalty program www.lottopoints.com. Both were key to opening new markets and adding value to OzLotteries.com customers that have grown to record numbers.

“Our record result, strong balance sheet and key lottery assets puts the Company in a good position to grow international markets and to evolve in the Australian market in the year ahead”, said Mr Mike Veverka, CEO and Founder of Jumbo Interactive Limited.

The Australian market for Internet lotteries has grown to approximately 6% of the overall lottery market since the launch of both OzLotteries.com and Tatts.com over
7 years ago. Similar markets overseas such as the UK have reached 15% giving a
guide to the growth ahead.

During the past 7 years, OzLotteries.com has adapted well to the emerging market with both OzLotteries.com and Tatts.com developing markets independently. Directors caution however that the market is set to evolve again with the expected introduction of a NSW version of Tatts.com with a potentially adverse impact to results in the year ahead. Management will continue to guide OzLotteries.com with a long-term view with respect to other operators and stakeholders in the lottery industry.

“I wish to thank the board and our staff for their valuable contribution in achieving this record result and I look forward to the year ahead”, said Mr Veverka.

Interactive Lottery Assets
The cornerstone to Jumbo’s success is the lottery technology that has been in constant development for over 10 years. In the past 12 months, this technology was given a boost with the release of the smartphone version m.ozlotteries.com that opened a new market of mobile customers. The customer loyalty program www.lottopoints.comwas also enhanced and is a key asset to retaining customer accounts. This technology is not only benefiting the Australian market, but is key to expanding international markets. Throughout the year, significant effort was directed towards expanding Australian lotteries into international markets as well as working with new lotteries in North America and Europe.

The technology was exhibited on the world stage at the World Lottery Association, European Lottery Congress, National Association of State and Provincial Lotteries (USA) and other key lottery associations (www.jumbolotteries.com). Further exhibitions are planned in the year ahead, particularly in the USA.

The customer database of Australian and overseas customers has also become a key asset to the Company. A significant number of customers evenly split between male and female and over 18 years old have accounts on OzLotteries.com and have developed loyalty to the brand through years of quality service.

About Jumbo Interactive
In 2000, the Company sold its first lottery ticket on the Internet and since then has developed www.ozlotteries.com into a popular place for lotteries to be played.

Jumbo has proven its ability to open up new lottery markets with its innovative technology and Internet marketing initiatives that have brought lotteries to new
demographics via the Internet.

International markets are key targets for the Company, in particular the $60 billion North American and $110 billion European lottery markets. The US market has not yet moved to the Internet due to federal regulations that are currently under review.
OzLotteries.com plays an important role in the Australian lottery industry with over
$17 million in additional State Government revenue raised from sales in 2011 and
$15 million in 2010.

 

[Douglas]

Re: Jumbo Interactive (Buffet would like this stock)

That cash number is a bit misleading. Most of "their" cash is actually client cash from winnings yet to be paid out and deposits made by customers in order to buy lottery tickets.

The cash balance in the 2011 Annual Report (Page48) is 11.770 million dollars. Of that amount 4.285 million is customers accounts so the real balance is 7.485 million which is pretty good for a company currently valued at 12 million who made 4.8 million profit in 2011.

 

[McLovin]

Re: Jumbo Interactive (Buffet would like this stock)

The cash balance in the 2011 Annual Report (Page48) is 11.770 million dollars. Of that amount 4.285 million is customers accounts so the real balance is 7.485 million which is pretty good for a company currently valued at 12 million who made 4.8 million profit in 2011.

This is true.

I just had a quick look through their annual report. I don't like the fact they are capitalising customer acquisition costs. Plus, the $1m they capitalised for "website development costs".And why is the dividend so woefully low? This thing should be throwing cash off.