The Jumbo Interactive Ltd (ASX: JIN) share price is one to watch after the company signed a long-term deal with Tabcorp Holdings Limited (ASX: TAH).
What does Jumbo Interactive do?
Jumbo Interactive is an Australian-based entertainment company and a digital retailer of official government and charitable lotteries.
The group’s flagship service, OzLotteries, is one of Australia’s largest digital retailers with over $150 million in ticket sales per year and over 2 million customer accounts.
Based on the current $13.62 Jumbo Interactive share price, the entertainment group is valued at $850.6 million.
Why is the Jumbo Interactive share price on watch?
Jumbo has finalised and signed a 10-year deal with Tabcorp to extend its current 15-year arrangement. The deal, announced on 29 June, locks in the current partnership across most of Australia until 2030.
That’s good news for investors and we could see the Jumbo Interactive share price on the move in early trade.
This helps build the platform for Jumbo’s plan to expand its lottery sales across Australia as part of its ‘$1 billion vision’ by 2022.
However, the new deal does not permit the sale of Tabcorp lottery products to Western Australian customers (where Tabcorp does not have a license).
Jumbo expects to know by 30 September the prospects of an agreement with Lotterywest regarding a potential solution for Western Australia.
The company’s shares have fallen 9.0% lower this year despite a strong recovery since the March bear market.
The Tabcorp share price is also under pressure after falling 21.2% lower this year.
What does this mean for Jumbo Interactive?
This is good news for Jumbo Interactive in providing some more long-term certainty.
I’d expect the Jumbo Interactive share price to be on the move as investors take in the latest announcement. This should also underpin sales growth and help build momentum behind the ‘Powered by Jumbo’ software platform.
Despite challenges amid the coronavirus pandemic, Jumbo reaffirmed its FY20 guidance on 29 June 2020. That included higher revenue expectations despite soft net profit and earnings numbers.
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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia 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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