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Why the Jumbo Interactive Ltd (ASX: JIN) share price hit a record high today

The Jumbo Interactive Ltd (ASX: JIN) share price is up 9% to $8.39 in trade today after the lottery operator and online ticket seller told investors to expect a strong first half to the fiscal year ending December 31, 2018. Below is a summary of what Jumbo told the market:

  • First half profit should be up 123% to $11.8 million
  • First half EBITDA should be up 66% to $32.3 million
  • First half revenue should be up 55% to $29.9 million
  • First half total transaction value should be up 64% to $145.8 million
  • Forecast number of large jackpots $15 million or more 21 – an increase of 17%

The strong performance in the first half is driven by continual improvements in our software platform and online marketing that have engaged existing customers and as well as acquired new customers, taking advantage of the favourable jackpot activity, ” commented Mike Verveka CEO and founder of Jumbo Interactive.

Jumbo is the group behind the popular OZ Lotto and Powerball lotteries and in its profit upgrade today acknowledged that the more large jackpots (>$15 million or more) available the more inclined people are to take a chance on buying tickets. This in turn drives sales or total transaction value, with the fact that sales rise faster than relatively fixed costs meaning profits rise even quicker.

In response to this bright news the share price hit a record high of $8.75 today and the question for investors is whether the $460 million company has more fuel in the tank.

A lot of Jumbo’s growth strategy is based around attracting new players to its ozlotteries.com offerings via internet marketing and new technologies like mobile applications for the iPhone or Google Voice. Its ozlotteries.com website is operated in partnership with betting king Tabcorp Holdings Ltd (ASX: TAH) that is also in a battle with rivals to win market share as gambling activity shifts online from traditional over-the-counter methods.

Yulia Mosaleva has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Jumbo Interactive Limited. 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 Scott Phillips.

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