PETALING JAYA: The environmental, social and governance (ESG) factor has become an increasingly important part of the investment process.
As far as Berjaya Sports Toto Bhd (BToto) is concerned, it has come a long way on this front.
But there is still room for improvement, according to Maybank IB Research.
BToto is one of three national number forecast operators (NFO) in the country.
In terms of corporate governance, the research firm said while BToto had advanced huge sums of money to related companies during the Asian Financial Crisis, that had been repaid.
Shareholders were also rewarded shareholders with huge dividends and capital repayments.
That said, non-synergistic acquisitions and its relatively high directors’ remuneration are areas for improvement, said Maybank IB.
On social impact, the research firm said this is already well managed under current regulations.
For example, the number of outlets are frozen since 1991 and the number of normal draws limited to three weekly. NFO outlets are also precluded from extending credit to gamblers, it pointed out.
Business-wise, analysts note that the group is on the path to recovery, albeit with challenges remaining.
Due to a change in spending patterns, its overall revenue per draw day could remain below pre Covid-19 levels over the next two years.
Affin Hwang Capital Research in a report last month, said the group’s management noted that the recovery post MCO 2.0 is slower than MCO 1.0, as current revenue is only 60%-70% of the pre-pandemic levels, despite the introduction of delivery services.
The reduction in the inflow of foreign workers might have also reduced demand for gaming spending.
Besides a change in consumer spending patterns, another challenge faced by legal operators such as BToto is losing market share to the illegal operators.
Affin Hwang Capital Research estimates that the illegal market is at least 1.5 - two times the size of the legal market.
Apart from convenience, the biggest lure of the illegal market is their higher pay-out, which is currently 28% higher than the legal operators, it said.
With the one-month hit arising from the MCO 2.0 as NFO outlets in all states except Sarawak were shut down, NFO players could see a weaker first quarter 2021 results.
Moving forward, enforcement on illegal operators remain the key to ticket sales growth while any replacement for the cancelled draws during the MCO 1.0 period would provide some earnings kicker, said analysts.