Jumbo Interactive: Initiating on No-Moat Digital Lottery Retailer

We initiate coverage of Jumbo Interactive with a fair value estimate of AUD 12.90 per share. Jumbo is predominantly a retailer of government and charity lottery tickets through its Oz Lotteries platform. As a first mover in Australian digital reselling, Jumbo has been a beneficiary of a channel mix shift toward online lottery ticket sales. However, Jumbo’s lottery retailing business has been ceding share to Lottery Corp’s “The Lott” platform, which offers a near-identical product range but without the 10% to 30% markup that Jumbo applies to its tickets. At current prices, shares in Jumbo screen as modestly overvalued. We think the market may be underestimating the difficulty that Jumbo is likely to face in stemming market share losses to The Lott and mispricing the risks surrounding the renewal of the reselling agreement renewal in 2030.