A GAMBLER could do worse. Given the odds of five-to-one, he would probably have been willing to take his chances on Magnum Corp Bhd.
After all, riding on the fortunes of a company that panders to the basic human desire to get rich quickly, and with little effort, must surely be a pretty safe bet. And yes, punting on one lot of Magnum since 1990 would have been richly rewarding.
With an initial investment of RM4,240 for one lot of shares in January 1990, the investor would have increased it by more than five-fold had he cashed out on the last day of December 2002, giving him a nice gain of RM22,362 over the 13 years.
His one lot of shares would have grown more than nine times to 9,282 shares, as a result of the companys frequent and generous bonus issues in the early 1990s.
A one-for-eight bonus issue in 1990 was followed by a share split in 1992, a year which also saw another one-for-10 bonus. The following year, the company rewarded shareholders again, with a three-for-two bonus issue, which effectively increased the companys share capital by 150% to RM497mil from RM199mil. In 1996, the company made yet another bonus issue of one-for-two.
An investor could also count on a decent flow of dividends, too, although the size of the dividends tended to be rather erratic. In most years, the company could be counted on to pay at least five sen, but not more than 10 sen per share. The exception appeared to be in 1991 when dividends surged to 65 sen per share, although the leaner years of the late 1990s saw this tumbling down to three sen or less.
Magnum was one of the earliest numbers forecast operators (NFOs) in the country with its four-digit (4D) operations under subsidiary Magnum 4D Bhd (previously, Leisure Management Bhd) contributing a substantial portion of its income and profits.
Although Magnum 4D still has the lions share of the market with an estimated 41% in 2001, the competitive environment has changed.
The profitability of the NFO business of Magnum attracted competition, both in the form of established and new players in the market, as well as from a host of unregulated illegal'' operators. The latter, who were offering higher payouts, took a significant portion of the business from NFOs such as Magnum and dampened their results.
In announcing its latest quarterly results (after-tax profit down 17%) in November 2002, Magnum said it was adversely affected by competition from flourishing illegal operators.
The company added that the more cautious spending pattern by consumers has also led to a decline in revenue (down 6%).
The following month, however, brought better news for Magnum when the finance ministry set pool-betting duty at 6% for all NFOs from January 2003. In response, Magnum said it would be raising its first prize payout by RM500, in tandem with other operators.
Analysts said they expected Magnum to enjoy better ticket sales this year only if the RM500 increase in the first prize payout was attractive enough to draw punters away from illegal operators.
The company said it was optimistic the increase in the prize payout structure would put the group in a better position to compete with illegal 4D operators.
How much Magnum is able to attract away from the illegal operators is apparently still open for debate. Bets anyone?