The Lottery Corporation (TLC) – Jackpot blues continue

The Lottery Corporation Limited operates lottery and games in Australia. It operates in two segments, Lotteries and Keno. It sells its products through news agencies, convenience stores, and other retail outlets, as well as the lott.com and mobile app. The company was founded in 1881 and is based in Brisbane, Australia.

‍

We have reviewed our estimates for The Lottery Corporation (TLC) in light of data on lottery prize pools for the first quarter of FY27. The September quarter data indicates lottery prize pools are 8% lower than the same period last year. The softness is across jackpot and base games. Jackpot game prize pools declined 9% year-on-year (YoY), reflecting an absence of major jackpot events above $40 million during the quarter. Base game prize pools were also weaker, declining 6% YoY. Digital trends also reflect the softer jackpot backdrop. Downloads of The Lott mobile application fell 21% in the first quarter compared with the previous corresponding period. We expect that over time digital penetration will increase. In FY26, digital sales represented approximately 42% of total lottery turnover, or around 47% when excluding products that are not available online. This is still below the international lottery operators, where digital penetration ranges from 48% to above 55%.

‍

Reflecting the weaker start to the year, we lower FY27 lottery revenue growth expectations for TLC to 10% from 15% previously. This lowers our FY27 EPS estimate by 9%. The revised forecast assumes jackpot activity returns to more normal levels from the second quarter of FY27 onward. This reflects our view that the current weakness is being driven by lower jackpots, and thus appears more cyclical rather than structural. The target price is lowered to $6.00 from $6.40 following the earnings revisions and an increase in the risk-free rate assumed in valuing the business to 5.0% (from 4.5%). We maintain the Buy recommendation given an undemanding valuation and note that a normalisation in jackpots would be a tailwind for earnings. Recent jackpot levels have appeared more supportive, with Powerball sitting at $60 million and Oz Lotto at $30 million.

‍