Jumbo Interactive Halts Trading, Pending Announcement
Jumbo Interactive (ASX: JIN) has suspended trading pending an announcement about its re-selling operations, including Western Australia. The request was made on the 15th of June and trading will resume on the 29th when the matters have been resolved and announced. As the end of financial year approaches, this is a situation investor need to monitor.
JIN has been set up well to enter the COVID-19 crisis, with no debt and a surplus of AUD65.5 million as of February, giving them the ability to weather uncertain times. A dividend of AUD11.5 million was paid on the 20th of March, which showed the strength of the company. The dividend payment policy includes paying shareholders 85 per cent of net profit after tax (NPAT), which is expected to be paid at the end of FY2020.
Looking at JIN operations, it has operated the online website, www.ozlotteries.com, under an agreement with Tabcorp (ASX: TAH) since 2005. This agreement is still safe from any changes where termination clauses to either party are not available until 2022, where 12 months of notice is needed before termination occurs. Use of technology has supported JIN thorough the last three months, with social group play and apps bolstering the company with a younger demographic.
There has been a decline in retail lottery sales, where 75 per cent of all lottery sales occurred before COVID-19. Unfortunately, the S&P Dow Jones Indices announced a rebalancing which removed JIN from the ASX 200, along with 11 other companies. A notable development was one of which is a competitor of JIN, Aristocrat Leisure Limited has now moved up to the ASX 20.
Estimated 2020 performance shows JIN expects 41 large jackpots compared to the 49 jackpots in 2019. Time to value (TTV) of previous projects is expected to bring in around AUD335 to AUD341 million compared to the AUD 321 million in 2019. Total revenue in 2020 is expected to reach AUD68.5 to AUD69.9 million compared to AUD65.2 in 2019. All figures have been carefully considered in relation to how COVID-19 has affected the market.
Focusing on the position of JIN fundamentally, they have steadily increased net operating cashflow since 2017, with AUD10.87 million increasing to AUD39.14 million in 2019. Other key fundamental data points such as revenue has seen a steady increase since 2017, more than doubling from AUD32.4 million in 2017 to AUD64.2 million in 2019. Operating margins percentages have also increased from 43.7 per cent in 2017 to 61.6 per cent in 2019, all of which support JIN as a stable business.
Ultimately, the company has had a great history and is in a good position. However, trading halts do often create uncertainty in the market, and investors need to assess any new information within the macroeconomic environment and the history of the company to determine what direction the company will take.
By Caroline Wong
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