Jumbo strikes another jackpot

Online lottery business Jumbo Interactive (ASX: JIN) has hit the jackpot once again, after announcing yesterday that it had received licenses to do business in all 16 German states.

The deal, which is for an initial five-year period, will permit the company to sell official German lotteries via web and mobile to the entire country, which will give the company access to around 68 million eligible players. Whilst it is estimated that this market could be worth around AU$2 billion within five years – based on trends in neighbouring countries – the company is working feverishly toward having the website up and running by the end of this year.

Although the German market holds enormous potential for Jumbo, the company has successfully penetrated a number of other countries since it began operations in Australia in the year 2000. With the aid of its innovative technology and internet marketing initiatives, Jumbo has managed to expand at an incredible rate and is now functioning in the $64 billion North American and Latin American lottery markets.

Since the beginning of 2012 – at which point the company’s prospects were rather speculative in nature – Jumbo has given shareholders outstanding returns. On January 1 last year, the company’s shares were trading for a low 35c before soaring as high as $3.28 earlier this year. Since that high, the shares have taken a battering after the company narrowly missed expected revenues on its half year report.

Since the announcement on Thursday however, the company’s shares have soared 14.2% and are now trading at $2.17.

Foolish takeaway

With a market capitalisation of only $88 million, Jumbo is becoming more and more appealing as it continues to announce further global expansion. The primary risk for the company, however, is government regulation being introduced. Due to the addictive nature of the industry, allowing users to have 24-hour access to gambling games could prove disastrous, as highlighted last week by Ainsworth Game Technology (ASX: AGI) founder and chairman, Len Ainsworth, which could catch the government’s attention.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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