If we think about the relationship between JIN and TAH, JIN is the service provider and TAH is the client. JIN provides a service in which they help TAH to sell lottery tickets online. But somehow, we got a situation here where the service providers have to pay the client to be able to provide the service, which is very unorthodox.
This is like the money you have to pay your local gangster or some tough guy in prison for them to “protect” you. In case you don’t know, “protect” here means “leave you alone” or “protect you from their own hands”.
So the situation between TAH and JIN goes like this:
“Hey, can you help me sell some lottery tickets? I will sell them to you at the same price as I sell them to my customers, so you will have to sell them at a higher price to make money. And since I am selling them too, you will be competing directly with me. But again I offer the same ticket at a lower price, so good luck with competing with me.
Oh wait, that is not enough. Since you marked up the price of my tickets and make some money out of it. You will have to pay me a 4.65% commission for letting you sell the tickets. Cheers bro”
So now, these “extra taxes” would reduce JIN’s profit significantly in the next 10 years, unless:
- They can sell a significantly higher amount of tickets or
- Increase their already premium price even more to maintain their revenue.
According to my calculation, the TAB TTV needs to grow at 5% for JIN to maintain their TAB revenue or their bottom line. This all depends on how JIN chooses to report for the service fee, they can take it off the revenue directly or account for it as an expense.
Either way, it is going to hit their bottom line pretty hard, around $4 mil in the first year and around $15 mil when the service fee reaches 4.65%. So in 2021, JIN TAB revenue will be down ~$1 mil even if they successfully grow their TAB TVV by 5%. This is not taking into account the depreciation of the $15 mil one-off cost from renewing the TAH contract.
I think the great hope for JIN here is to grow their SaaS segment and diversify away from the TAH reselling service because they are not getting a good-faith deal with TAH due to the imbalance of power.
Any thoughts on the relationship between JIN and TAH and JIN future prospect?
Full analysis here:
https://whealthyninja.com/jumbo-jin-analysis-part-3-tah-contract-the-good-the-bad-and-the-ugly/
(20min delay)