PETALING JAYA: Industry gross number forecast operator (NFO) sales are on a rebound, following active enforcement by the authorities to stamp out illegal gambling activities.
According to Maybank IB Research, Classic 4D sales across Malaysia have gone up. This is significant as Classic 4D accounts for an estimated 70% of industry gross NFO sales.
The research house raised its 2019 industry gross NFO sales per draw growth forecast to 3%, from 2% previously.
This conservatively implies only one percentage point contribution from more active enforcement.
“With no FIFA World Cup this year, we expect the gross NFO sales per draw of every NFO to recover 4% to 5% year-on-year (y-o-y) in the second quarter of 2019 (1% y-o-y on an annualised basis).
With fewer special draws (held on Tuesdays) in 2019, the firm expects gamblers to bet more on Wednesday draws.
“If 25% of the sales that would have been garnered by special draws that were reduced, were to migrate to Wednesday draws, our calculations indicate that 2019 industry gross NFO sales per draw could grow by 1% y-o-y,” said Maybank IB Research.
While the net impact of the growth forecast is to raise Berjaya Sports Toto Bhd and Magnum Bhd’s earnings per share estimates by only 1% to 2% and dividend per share estimates by up to a lukewarm 4%, Maybank IB Research is positive nonetheless as it is more confident that earnings for NFOs will recover going forward, after several years of near continuous decline.
A potential re-rating catalyst would be more active enforcement, even against illegal gamblers.
“Classic 4D sales had been easing due to intense competition from illegal NFOs and thus, dragged industry gross NFO sales with it since 2010 and industry gross NFO sales per draw since 2008,” Maybank IB said.
“Thus, this development is a refreshing change for the NFO industry,” it said.
On July 20, 2018, the Royal Malaysian Police set up special operations rooms with hotlines in every state.
Concerned citizens have since been reporting illegal gambling and NFO outlets for the police to investigate and raid.
Google Trends also imply that most illegal gamblers are not migrating their bets online.
The Lotteries Act 1952, Common Gaming Houses Act 1953, Betting Act 1953 and Pool Betting Act 1967, which govern gaming in Malaysia, prescribe fines and jail terms for illegal gambling and NFOs.
However, none of these acts are for illegal gamblers themselves and legal NFOs are lobbying regulators to amend the aforementioned acts to not only prescribe higher fines and jail terms for illegal gambling and NFOs, but also fines and jail terms for illegal gamblers.
Additionally, there could be even more upside with the introduction of online betting.
“We understand that at least three technology companies are presenting their case to legal NFOs and regulators to legalise online betting.
“If legal NFOs were allowed to offer online betting, this would improve their sales reach which has been declining as the number of NFO outlets in Malaysia has been frozen since October 1991,” said Maybank IB Research.