Criterion: How investors can hit the ASX lottery jackpot

• The Lottery Corporation’s performance rides on the number of jackpot draws in a given period.
• Lotteries are a resilient business, but not impervious to cost-of-living pressures
• Jumbo Interactive is TLC’s exclusive online ticket reseller

 

Participants in monster jackpot lotteries are acting on emotion rather than sober statistical analysis – which shouldn’t be news to anyone.

The headline amount might be impressive – $100 million in the case of OZ Lotto’s recent equal-record draw – but there are more participants and thus less chance of winning.

Evans & Partners estimates around 98 million Australians bought a ticket, implying a one-in-a-million chance.

Still, tell that to the sole winner – a western Sydney woman who is too busy planning a dream holiday to dwell on statistical quirks.

 

Recession proof – you can bet on that

Even more so than other gambling, lotteries have a sound reputation for being impervious to economic conditions – good or bad.

Events such as this week’s rate cuts – the equivalent of a lottery win for stretched homeowners – are unlikely to change buying patterns.

“Australian lotteries have shown resilience over a long period of time, with low sensitivity to economic growth illustrated by 4% compound average growth over the past 25 years,” Macquarie Equities says.

As The Lottery Corporation’s (ASX:TLC) half-year numbers revealed on Wednesday, corporate performance is influenced by the number of jackpots.

The more jackpots draws, the higher revenue on which the company literally clips the ticket.

According to broker Evans & Partners, Oz Lotto – one of TLC’s key games – was bereft of large jackpots between the 2019-20 and 2022-23 years.

This month’s $100 million jackpot was the only one since 2012, which defies the probability gods.

In May 2022 TLC tweaked the game, lengthening the odds of there being a division one winner by 38%.

Oz Lotto sales hit a record in the 2023-24, but now TLC is ‘cycling’ this uptick.

 

Results off the pace, but “resilient”

TLC says it’s also not immune entirely to cost of living pressures, with players purchasing less frequently.

The country’s pre-eminent lotteries operator, TLC posted a 6% revenue decline for the December 2024 half, to $1.779 billion.

Net profit also declined 10% to $176 million.

Management described the result as “resilient”, given the lack of jackpots – and investors seemed happy enough.

The company reckons the jackpot situation will right itself naturally, but it’s not leaving everything to chance.

One measure entails increasing the Saturday Lotto prize pool from $5 to $6 million, albeit with a hefty 13% prize rise (from 75 cents to 85 cents per game).

Did someone mention the cost of living?

“The lotteries market continues to be attractive, delivering uninterrupted, long-term growth, generally ahead of combined population growth and inflation,” says TLC CEO Sue van der Merwe.

“This, together with the strong fundamentals of our business, underpins our ability to generate strong returns for shareholders through the economic cycle.”

TLC has not exactly been a ‘get rich scheme’ for investors since company separated from mothership Tabcorp Holdings (ASX:TAH) in May 2022.

Since then, the shares have gained 6%, compared with a 17% increment for the top 200 ASX stocks.

The current yield of 3% is solid but unspectacular.

 

Jumbo opportunity

The only other ASX lotteries exposure, the capital-light Jumbo Interactive (ASX:JIN) is the only licensed digital re-seller for TLC.

(TLC also sells online in its own right).

Currently, 58% of TLC’s tickets are bought at physical outlets, with the remainder online. But the latter is expected to overtake the former.

TLC says digital sales held up better during the half, falling 3.5% compared with a 6.7% decline for retail tickets.

Yesterday, Jumbo reported a 10.5% revenue decline to $66.1 million, with underlying net profit falling a similar degree to $18.6 million.

Once again, much of the suboptimum nature of the results was due to lower jackpots – and that issue has continued into the first six weeks of the current half.

Jumbo shares have lost half their value since peaking at around $27 a share in October 2019.

But the company is still valued at an elephantine $800 million.

Jumbo also runs fundraising lotteries for not-for-profit bodies locally as well as in the UK, Canada and the Pacific Islands.

A key risk for Jumbo is that TLC removes the Jumbo’s exclusive mandate, but it looks to be a mutually advantageous tie-up.

Long-term reliability aside, another appeal of lottery companies is that they tend to result in less harm than other forms of problem gambling.

Thus, TLC and Jumbo are unlikely to be subject to the same regulatory blowtorch faced by casinos or sports betting agencies.

 

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.