Jumbo (ASX:JIN) share price on watch following signed Lotterywest agreement

The Jumbo Interactive Ltd (ASX: JIN) share price will be on watch this morning after the company announced a signed agreement with Lotterywest.

What does Jumbo do?

Jumbo is Australia’s largest digital lottery retailer, operating through its flagship service, Oz Lotteries.

Jumbo runs both national and charity lotteries, as well as develops and supplies software platforms to other lottery companies. Its in-house digital platforms aim to create an engaging and entertaining experience for all customers.

What was signed?

According to the release, Jumbo subsidy TMS Global Services signed an agreement with the Western Australian state government-owned and operated, Lotterywest.

The deal will see Jumbo provide its online software platform and services to Lotterywest for up to the next 10 years. This follows on from the binding term sheet signed and announced to the market on 29 September.

Jumbo CEO, Mr Mike Veverka, commented on the milestone partnership:

I am pleased that the Lotterywest Agreement has now been signed on time and on terms as anticipated. This is a major achievement for Jumbo securing our first government client setting up a solid long-term partnership and providing strategic opportunities for Jumbo.

Terms of the deal

Under the agreement, Jumbo will receive a 9.5% service fee for every customer transaction through the white label platform. The service fee will cover Jumbo’s software operation, technical and customer support, and development services and costs.

The agreement is to be a three-year initial term, with the option for a further three and four years. The extension options are to be decided by Lotterywest.

Customer ownership will be transferred to Lotterywest at the moment the customer opts in to the white label platform.

Lotterywest will oversee the marketing strategy for players, and Jumbo will manage customer support. This will be conducted on the white label platform, and Jumbo will only be able to market to customers by approval from Lotterywest.

Lastly, Lotterywest has the option to transition white label players to its website and app for 12 months from the go-live date. Both parties expect to have completed software integration by late December.

Jumbo share price summary

The Jumbo share price has made a solid comeback of 83% since falling to as low as $6.99 in March. For the calendar year to date, the shares in the lottery retailers are down 14%, and down 41% from their 52-week high.

Jumbo has a market capitalisation of $800 million and a price-to-earnings (P/E) ratio of 31.1.

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Aaron Teboneras owns shares of Jumbo Interactive Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. 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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