Martin Conlon's commentary on value:
Businesses such as Jumbo Interactive, which fell meaningfully over the quarter, but remains more than 100% above the price from a year ago, is a case in point. The vast bulk of the business stems from the online sale of lottery tickets under an operating licence from Tabcorp which expires in 2022. These customers effectively pay a surcharge to purchase lottery tickets online, despite being able to purchase them online without a surcharge from Tabcorp. If Tabcorp terminates the agreement it is highly likely these customers will continue to buy lottery tickets and the Jumbo business would disappear. Optimism on the trajectory of lottery sales due to jackpot sequences and an ongoing shift to digital sales led to an expectation of rapidly growing earnings for Jumbo. Though revenues are relatively small ($67m in 2019), given the business is largely just a website, margins are high (operating income $38m). Infatuation with rapid growth and earnings momentum saw this business valued at more than $1.7bn in October, 25 times revenues and more than 40 times earnings for a business which exists almost solely due to a license which expires in 2 years, is in our view, not the right price. By a lot.
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$13.94 |
Change
0.230(1.68%) |
Mkt cap ! $877.7M | |||
| Open | High | Low | Value | Volume |
| $13.68 | $14.49 | $13.65 | $8.136M | 577.9K |
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| No. | Vol. | Price($) |
|---|---|---|
| 1 | 1886 | $13.93 |
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| Price($) | Vol. | No. |
|---|---|---|
| $13.99 | 5000 | 1 |
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