Luck and the street smile on Jumbo Interactive

afr.com:

Lotteries, just like everything else, are getting more expensive. In May, the price of a Powerball entry went up for the first time since 2018.

A record $160 million Powerball jackpot, split between three winners in October last year, had an outsized influence on the performance of two ASX stocks: Lottery Corp, which administers Oz Lotto and Powerball, and digital reseller Jumbo Interactive.

Irregular players may not realise that Jumbo charges a huge premium over lottery tickets sold from physical vendors such as newsagents. 

Indeed, the first quarter was one of the lowest average value per jackpot periods in more than three years, Jumbo said. That changed radically with the Powerball bump in the second quarter.

In putting up the price of Powerball, Lottery Corp wants to generate more frequent and larger jackpots by increasing the size of prize reserves, which appears the shortest route to improving earnings. Jumbo decided to match this increase with a further increase of its own.

“Jackpots remain a significant driver of lottery retailing ticket sales (and revenue) and in any given year there is uncertainty as to the exact number and aggregate value of large jackpots,” the company says.

There has been no trading update from Lottery Corp since February. But Jumbo told the Macquarie conference there were 11 large jackpots as of April, with the average value tracking at $25.5 million with two months to go; the first-half averaged out at $41.7 million from 23 large jackpots. That is by all accounts on the lean side.

Analysts tracking the big games have developed a pretty good proxy for performance. And the second-half made few headlines, with just a $100 million jackpot in June claimed by a single winner.

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