State elections to determine Sports Toto earnings

Sports Toto is slated to release its third-quarter financial year 2023 results next month and it will be the first quarterly results without contributions from its Kedah outlets after the suspension of it operating permits.

PETALING JAYA: Sports Toto Bhd could see a 0.39% change in earnings if there are any net addition or reduction to its total outlets after the forthcoming state elections.

The risks would be greater if the unity government loses Selangor, forcing Sports Toto to downsize its operations to contain costs if the new Perikatan Nasional-led state government chooses to close down all gaming operations in the state.

However, TA Research said the probability of such an occurrence is slim.

It added that seems to be what the market is perceiving judging from the year-to-date share price performance of 11% contraction, which has greatly ignored the potential earnings risk.

According to the research firm, the 0.39% change in earnings are based on its rough calculations.

Malaysia will likely hold simultaneous polls in July in six states after state chiefs reached a consensus to dissolve their respective state assemblies in the last weeks of June.

Until then, the share price performance of Sports Toto would likely remain lacklustre on the back of apparent risks to Toto 4D operations in these states if the unity government fails to defend its majority in Selangor, Pulau Pinang and Negri Sembilan, TA Research said.

On the other hand, it would be positive to Sports Toto if the 19 affected Toto 4D outlets in Kedah (due to non-renewals of operating permits early this year) could reopen for business if the unity government wins the state election in Kedah.

Sports Toto is slated to release its third-quarter financial year 2023 (3Q23) results next month and this will be the first quarterly results without contributions from its Kedah outlets after the suspension of it operating permits.

Nonetheless, TA Research expect the results to be flat or slightly weaker quarter-on-quarter at RM50mil to RM55mil due to seven lesser draws in 3Q23, which would be partially offset by bumper sales incentivised by big jackpots.

The two mega Toto 4D jackpots of RM11mil and RM23mil were struck in February and March, respectively.