For Lottery Corp, Large Jackpots Are a Win All Around

We raise our fair value estimate for shares in wide-moat Lottery Corp to AUD 4.40, from AUD 4.20 previously. The upgrade is principally due to an increase to our operating earnings forecasts, lifting our fiscal 2023 EBIT forecast by 5% to AUD 601 million, and fiscal 2024 EBIT by 4% to AUD 632 million amid strong jackpot game performance. As a beneficiary of COVID-19 lockdowns, Lottery Corp enjoyed a 20% increase in revenue in the two years prior to fiscal 2022. Most lottery retailers were deemed essential services and remained open during periods of lockdowns and restrictions, allowing consumers straightforward access to digital lottery sales as a substitute for other forms of in-person gambling such as electronic gaming machines, sports betting, or casino games. Lottery Corp pays lower sales commissions from digital sales, with the channel mix-shift to online propping up profit margins.