Fund manager Wilson Asset Management has named an appealing S&P/ASX 300 Index (ASX: XKO) stock that could be worth betting on. That business is Jumbo Interactive Ltd (ASX: JIN), an Australian lotteries retailer and provider of a software as a service (SaaS) platform for government and charity lottery operators.
Why does WAM like this ASX 300 stock?
The fund manager pointed out that the Jumbo Interactive share price has been rising recently because of a surge in lottery ticket sales for Powerball jackpots during the month.
WAM thinks the new players that Jumbo Interactive has attracted through this jackpot period can be converted into regular players, boosting customer numbers and this can increase revenue as a result.
The investment team wrote about the ASX 300 stock:
We believe that Jumbo Interactive is currently undervalued by the market with a net cash balance sheet providing plenty of scope for earnings-accretive acquisitions or capital management.
Recent trading update
At the annual general meeting (AGM), it said that its revenue for the four months to 31 October 2023 had grown 3% to $35 million.
It revealed the SaaS total transaction value (TTV) had increased 20% to $53.9 million in the first quarter, while managed services TTV increased to $66.1 million.
In terms of the outlook, with lottery retailing, it’s expecting an improved revenue margin following portfolio pricing changes which were announced in 2023.
The acquisitions are expected to see mid-to-high single-digit revenue growth.
For the group, the ASX 300 stock is expected to see underlying operating cost growth grow at a slower pace than revenue on a like-for-like basis.
Overall, it’s expecting to see strong free cash flow generation, which can enable a targeted dividend payout ratio of between 65% to 85% of statutory net profit after tax (NPAT). It’s looking at acquisitions, supported by “balance sheet strength and debt headroom.”
Jumbo Interactive share price snapshot
Since the start of 2024, the Jumbo Interactive share price has risen by 15%.
The post A fund manager is betting on this ASX 300 stock. Is it a buy? appeared first on The Motley Fool Australia.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Jumbo Interactive. The Motley Fool Australia has recommended Jumbo Interactive. 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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