Lottery Corporation's Licence Win Meets an Unusual Jackpot Drought

A 40-year Victorian licence renewal derisked the business but cost more than expected, before an unusually quiet jackpot stretch cut profit in August.

30 Sep 2026 · 3 min read

Lottery Corporation secured a 40-year Victorian lottery licence renewal on better than expected terms, but paid more than the market anticipated, prompting earnings downgrades even as fund managers continued to value its near-monopoly position and long-dated licence base, before a highly unusual lack of large jackpots dragged profit down nearly 10 percent in August.

A near-monopoly with periodic jackpot volatility

Perpetual Asset Management rated the stock a buy, saying it really likes the lottery category and asset class, which has shown over time that periods of jackpot volatility are followed by solid long-term growth, with Lottery Corporation owning a near-monopoly in Australia backed by long-dated licence concessions outside Victoria. Plato Investment Management also rated it a buy, noting the company did well in Keno on a good jackpot outcome, but its main lottery business faced a genuinely tough jackpot period with fewer large jackpots than normal, a trend it expects to bounce back. Investors Mutual Limited said the stock rose 5.8 percent for the quarter, with elevated volatility giving the fund an opportunity to enhance portfolio income by generating option premium on its holding. Airlie Funds Management said it holds Lottery Corporation not simply as a defensive but because of its unique collection of long-dated licences carrying a significant long-term margin tailwind from the shift toward purchasing lottery tickets online, backed by a refreshed management team focused on cost discipline.

We believe it is a unique collection of long-dated licences with a significant long-term margin tailwind from the mix-shift to purchasing lottery tickets online, with a refreshed management team keen to drive opex discipline.

— Airlie Funds Management, Monthly Report, March 2026

A 40-year Victorian licence renewal, at a cost

Pendal Group said the stock fell 4.2 percent after Lottery Corporation announced it would pay $1.15 billion to the Victorian government for a 40-year lottery licence taking effect from the expiry of its current licence in 2028, with the length itself a positive surprise, since the market had expected only 20 years, de-risking the company, though the price paid was higher than expected, resulting in earnings downgrades. Ten Cap added to its position given the stock's defensive earnings profile, dominant market position and resilient cash generation, attractive in an environment of softening discretionary consumer demand. Antares Capital initiated a position attracted by the defensive growth profile, arguing that with rate hike expectations likely near their peak, Lottery Corporation tends to perform better in stable to declining rate environments, with recent rate increases creating an attractive entry point.

The length of the new licence was a positive surprise (the market was expecting 20 years) and derisks the company. However, TLC paid more than expected for the licence, resulting in downgrades.

— Pendal Group, Newsletter, May 2026

An investor day that underwhelmed on cost-out ambitions

Pendal Group said an investor day was received slightly negatively, with strategy largely more of the same, doubling down on a digital push to improve customer engagement, and while there had been anticipation of a large cost-out program, the announced $10 million FY26 opex reduction did not impress. L1 Capital said Lottery Corporation is one of the highest-quality infrastructure-like assets in the Australian market, exemplified by the same strategy day it attended in Sydney, with the core attraction being the quality and durability of the licence base, operating long-dated, highly defensive lottery licences with significant barriers to entry, following the recent finalisation of the Victorian licence.

We think the lottery corporation is one of the highest quality infrastructure-like assets in the Australian market. TLC operates long-dated, highly defensive lottery licenses with significant barriers to entry.

— L1 Capital, Presentation, June 2026

August's jackpot drought bites

Investors Mutual Limited said the stock was disappointing, dropping 9.3 percent as a highly unusual lack of large lottery jackpots reduced its yearly profit, though its longer-term prospects and market position remain unchanged.

What fund managers say they are watching next is whether jackpot frequency normalises after the unusually quiet stretch, delivery of the digital and online mix-shift margin tailwind, whether the $10 million FY26 opex reduction expands into a larger cost-out program, and integration of the newly secured 40-year Victorian licence from 2028.