PETALING JAYA: Number forecast operators (NFOs) Berjaya Sports Toto Bhd and Magnum Bhd had their forecast earnings revised upwards for the next two financial years, by RHB Research, following news of extra special draws.
The research unit is positive on news that special draws will increase by another 14 days to 22 days in 2021, in order to aid the government to gain extra tax revenue.
However, it noted that margins from special draws are much lower when compared to the normal draws.
This is due to the additional 10% contribution paid to the government on all special draws’ gross ticket sales after deducting the 8% gaming tax.
RHB Research also said both NFOs will continue to benefit from ongoing government efforts to curb illegal gambling.
It noted that ticket sales have recovered strongly since re-opening in June, and are now estimated at 85% to 90% of pre-pandemic levels.
RHB Research said Berjaya Sports Toto’s forecasted dividend yields of 6.8% to 7.2% for financial years 2021 and 2022 (FY21F to FY22F), ending June 30 annually, are attractive for long-term yield-seeking investors.
The research unit also increased Berjaya Sports Toto’s FY21F to FY23F earnings by 2.4% to 2.7% after factoring in 22 special draws each year, going forward.
Also, while there is underlying risk on the non-renewal of Berjaya Sports Toto’s Philippines Gaming Management Corp associate’s lottery equipment lease agreement, the impact to RHB Research’s earnings forecasts is minimal, at less than 3%.
Meanwhile, regarding Magnum, RHB Research has forecasted dividend yields of 7.3%, and increased forecasted earnings by 2.4% to 2.5% in FY21F to FY22F (ending December 31 annually). No changes were made to Magnum’s FY20F earnings.
RHB Research said Magnum is its preferred NFO pick, as a pureplay NFO, and further earnings upside could come from the legislation of stricter gambling laws and potential monetisation of its 6.3% stake in Malaysian cellphone-network operator U Mobile.
RHB Research is maintaining its Buy call on Berjaya Sports Toto with a new discounted cash flow (DCF)-based target price of RM2.49 (from RM2.44 previously).
It is also maintaining its Buy call on Magnum with a higher DCF-derived RM2.73 target price (from RM2.66 previously).
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