Kenanga research said in a note that BJToto saw ticket sales for Classic 4D rising 5% since measures to combat illegal operators started last September.
"The enforcement’s effort is healthy for the NFO players as the size for black market is easily 1-2 times bigger than the licensed NFO volumes," said the research house.
It maintained its outperform call on BJToto with a revised share price of RM2.95 from RM2.65 previously.
Kenanga noted that BJToto's share price gained 25% year-to-date due to the improving ticket sales amid strong advances in other sin stocks such as Magnum, Carlsberg and Heineken.
"Even with strong gains, BJTOTO is still a laggard as it is the cheapest among these sin stocks with its highest dividend yield.
"It trades at 13x PER which is only half of brewers’ valuation while BJTOTO offers >6% yield against the rest at >3%.
"As such, BJTOTO can be a sector catch-up play," it said.
Outside of Malaysia, earnings from the group's Philippine-based PGMC and UK unit HR Owen could be volatile.
Pre-tax profit from PGMC fell to RM5.2mil in 3Q19 from RM22.7mil in 2Q19 owing to lower leased rental income as the contract for the lottery system machine expired last August.
Earnings from HRO were volatile given the auto sales value coupled with the volitility of the pound sterling.
BJToto's 10.2%-owned Vietnamese Berjaya GTI remains in the red despite operating since mid-2016, and is unlikely to be profitable in the near future given the infant NFO market there.
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