Maybank IB Research retains Buy on Magnum, Berjaya Toto


  • Analyst Reports
  • Monday, 06 Jul 2020

KUALA LUMPUR: Maybank Investment Bank Research is retaining its Buy on numbers forecast operators (NFOs) Magnum and Berjaya Sports Toto as jackpot sales have recovered by about 78% in two and a half weeks.

The research house said on Monday NFO outlets reopened on June 17 and it quantified their jackpot sales are now at 78% of pre-Movement Control Order (MCO) levels. “We do not discount the possibility that this rapid recovery could also be reflected in Classic 4D sales. We maintain our CY20 industry gross NFO sales/draw growth of -5% YoY for now.

“It also crosses our mind that more special draws could be awarded for the government to ‘claw back’ tax revenues,” it said, Maybank Research explained even though jackpot sales account for only 20% of industry sales, they can be accurately estimated draw by draw unlike Classic 4D.

According to its estimates, industry jackpots sales on June 17, (the first draw since reopening) accounted for 50% of industry jackpot sales on March 15, (the last draw before closure due to the MCO). Only two and a half weeks later, industry jackpot sales on July 5 accounted for 78% of industry jackpot sales on March 15.

Note that although Resorts World Genting reopened on June 19, it did not have a negative impact on industry jackpot sales. “We gather that the rapid recovery is due to two factors:- (i) NFO sales per pax tend to be small and therefore, not so sensitive to fluctuations in disposable incomes; and (ii) gamblers are less averse to visiting NFO outlets as they are not enclosed areas.

“We gather that the rapid recovery could also be reflected in Classic 4D sales which account for 80% of industry sales. We maintain our CY20 industry gross NFO sales/draw growth of -5% YoY for now pending a meeting with the respective managements,” it said.

While NFO outlets were closed from March 18 to June 16, they had to forego 40 draws (39 normal and one special draw) or one-quarter of the total number of draws per annum.

"As we assumed that NFO outlets would reopen a week earlier, we assumed that they had to forego a fewer 37 draws. That said, we leave our estimates unchanged for now as we do not discount the possibility that more special draws may be awarded for the government to ‘claw back’ tax revenues.

“We estimate that the NFO sector contributes RM2bil in taxes per annum. Special draws will help ‘claw back’ RM500mil in taxes foregone when NFO outlets were closed,” Maybank Research said.

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