NFOs benefit from quick rebound in jackpot sales

KUALA LUMPUR: Numbers forecast operators (NFO) are seeing a surprisingly quick recovery in jackpot sales, which could see the companies resume paying dividends in the near future.

Despite the relatively high number of Covid-19 cases in the country by historical standards, Maybank Investment Bank Research said Magnum and Berjaya Sports Toto NFO sales are expected to recover to about 80% of pre-Covid-19 levels "very soon".

According to the research house, estimates of jackpot sales post-reopening on Sept 14, 2021, is similar to that of the post-reopening on June 17, 2020.

"Recall that post-MCO 1.0, Magnum and Berjaya Sports Toto NFO sales (Classic 4D, jackpot and other games) recovered quickly to about 80% of pre-COVID-19 levels).

"Thus, we gather that both MAG and BST NFO sales will again recover quickly to about 80% of pre-Covid-19 levels in 4Q21 and beyond," said the research house, which has "buy" calls on both stocks.

Maybank IB noted that jackpot sales can be reliably estimated from draw to draw due to their "snowballing" feature. However, Classic 4D, which accounts for about 75% of industry sales, cannot be reliably estimated by draw as there is no "snowballing" feature.

While Maybank IB's forecasts for Berjaya Sports Toto and Magnum could have been raised 35% to 40% due to NFO outlets reopening 1.5 months earlier than expected, it conservatively kept its earnings per share estimates unchanged at RM2.44 and RM2.41 respectively.

"We left our EPS estimates unchanged lest new Covid-19 cases climb and force NFO outlets to shut again," it said.

"In any case, any positive earnings revision for this current FY is unlikely to be repeated next FY onwards as we already assume that all NFO outlets will operate on full year basis going forward," it added.
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