PETALING JAYA: The movement control order (MCO) 3.0 is expected to slow down ticket sales for Magnum Bhd even though its outlets remain open as punters may exercise caution and avoid crowded places.
Some punters may buy from illegal operators due to the ease of transaction, and this may chip off some revenue from the legal number forecast operators (NFOs), said RHB Research.
However, as things return to normal, ticket sales should recover strongly given the fairly inelastic nature of the number forecast business.
RHB Research viewed the disruption in ticket sales during MCO 3.0 as short-term hurdles, especially with the rollout of the vaccines.
It said NFOs are known to be resilient and demand is fairly inelastic, even in a dull macroeconomic environment.
Citing the MCO 2.0 as an example, it said ticket sales then hovered at about 20% of pre pandemic levels, when most outlets were temporarily closed from Jan 13 to Feb 15.
Since reopening on Feb 16, ticket sales were able to recover swiftly to about 80%-85% of pre-pandemic levels.
Based on its jackpot prize compilation, it estimates that first quarter 2021’s average jackpot ticket sales have fallen by about 18% quarter-on-quarter (q-o-q) and 32% year-on-year (y-o-y). This is despite a bigger average jackpot size of about 27% q-o-q, and about 23% y-o-y.
Given the scenario, RHB Research has cut its financial year 2021-2023 earnings for Magnum by 10.4%-4.3% after lowering its ticket sales assumptions.
The research house also lowered the target price to RM2.73 a share from RM2.97.
However, it continues to favour the stock as it has attractive financial year 2022 yields of 7.6%.
Further earnings upside, said RHB Research, could come from the legislation of stricter gambling laws and potential monetisation of its stake in U-Mobile.