PETALING JAYA: The conclusion of the state elections earlier this month is expected to bode well for Magnum Bhd
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UOB Kay Hian (UOBKH) Research said the dissipating political risk is a premium for the number forecast operator with the government securing a status quo.
“We expect better clarity for Magnum as the political landscape is stabilising and investors can now focus on the company’s fundamental qualities.
“The political status quo solidifies our view that there will not be any detrimental policies such as gaming tax hikes and outlet closures for Magnum in other states.”
UOBKH Research noted that Magnum is merely trading at 42% of its pre-pandemic market caps, after being heavily punished by the pandemic and political uncertainties.
“In our opinion, the current valuations have more than priced in the downsides, especially when earnings are on course for sequential recovery in upcoming quarters, leaving a vacuum of capital upside to be filled up.
“Meanwhile, Magnum should gain more attention as it continues to deliver lush prospective dividend yields of 7% and 10% for 2023 and 2024, respectively, in tranches upon earnings recovery,” said the reseach house.
RHB Research noted that Selangor, Penang and Negri Sembilan have close to 33% of Magnum’s total outlets, adding that the political status quo would mean that the company could operate business as usual and not have to fear outlet closures as in Kedah.
“We believe this diminished uncertainty had reduced Magnum’s need to hold cash and could lead to improved dividend payout, potentially expediting the normalisation of its dividend per share.
“That said, with the increasing conservative political influence in Selangor, where Magnum houses 18% of its total outlets, we think investors will keep a close eye on this going into future elections.”
Magnum saw its net profit jump 65.3% to RM43.6mil in the second quarter ended June 30 from RM26.4mil in the same period last year.
Revenue for the quarter rose 11.4% to RM537.1mil against RM482.1mil a year ago while earnings per share expanded to 3.04 sen versus 1.84 sen previously.
In the first half of this year, Magnum posted a higher net profit of RM59.4mil on revenue of RM1.08bil.
RHB Research said earnings came in within expectations.
“We consider this to be within our forecasts as we leave some room for downside surprises in the coming quarters in the event that the prize payout ratio is higher than our expectations.”
UOBKH Research, meanwhile, said the company’s classic 4D games and jackpot ticket sales had seen commendable recovery.
“Overall, Magnum’s revenue improved 11.4% year-on-year, showing signs of accelerated ticket sales recovery, as anticipated,” the research house added.
