Why has the Jumbo Interactive Ltd share price suddenly soared?

Credit : Will

It was a good day for gambling and gaming investors on Tuesday with the share price of casino operator Star Entertainment Group Ltd (ASX: SGP) finishing 1.7% higher after reporting results which pleased the market.

Likewise, it was a good day for shareholders of Jumbo Interactive Ltd (ASX: JIN) whose share price ended the day nearly 9% higher after reporting a significant rebound in profitability.

Jumbo is an online retailer of lottery tickets in Australia – where it sells a range of lotteries operated by Tatts Group Limited (ASX: TTS). The group also has operations in Germany and Mexico.

Here are the key points from Jumbo’s interim financial results:

  • Total transaction value jumped 22% to $81 million
  • Revenue grew 21% to $17.8 million
  • Net profit before tax leapt 189% to $3.5 million
  • Net profit after tax soared 654% to $2 million
  • The fully franked dividend was increased to 2 cents per share (cps) from 1.5 cps in the prior corresponding period (pcp). The record date will be March 11 and the payment date is March 25
  • Additional new accounts increased 8% to 108,650 over the pcp

What now?

With the stock up 24% in the past 12 months and around 250% over the past five years, shareholders have certainly been well rewarded for betting on Jumbo’s shares.

Jumbo’s expansion into Germany appears to be on more stable ground now with the group reporting a significantly reduced loss of $1.3 million for the half year, compared with a divisional loss of $3.6 million for the 12 months to 30 June 2015.

Jumbo noted that “the second half of the 2016 financial year has had a good start in terms of large Jackpots, new customers and customer activity.”

This positive operating momentum could push the share price even higher given the stock appears to be trading on an undemanding multiple.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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