PETALING JAYA: Sports Toto Bhd
is entering its financial year ending June 30, 2027 (FY27) on a potential earnings catalyst from the resumption of Kedah operations, although analysts remain divided on how much this can offset structural pressure on its lottery business and weakness at UK luxury car dealer H.R. Owen.
In a report post-Sports Toto’s results for the fourth quarter of FY26 (4Q26), RHB Research said Sports Toto’s management is confident of resuming its lottery operations in Kedah following the Federal Court’s unanimous ruling on Aug 12 not to grant leave for the Kedah state government’s appeal to ban the renewal of the number forecast operator ( O) business premise licence in the state.
“We estimate the resumption could provide a mild 3% uplift to the lottery business despite an unclear timeline at present.
“This could potentially provide a buffer to the structural challenges facing the lottery segment, namely, intense competition from illegal Os due to the easy access through digital platforms,” RHB Research said in a report.
The pressure is evident in Sports Toto’s sales per draw, which have remained stagnant at about RM17mil to RM19mil since FY23.
Meanwhile, the research house expects the group’s car dealership business to remain subdued amid the challenging macroeconomic environment.
Sports Toto’s 4Q26 revenue fell 4.9% year-on-year (y-o-y) to RM1.6bil, mainly due to one fewer draw and weaker performance from its motor dealership business.
However, core earnings surged 55% y-o-y to RM62.5mil, driven by a sharp turnaround in its other businesses, which swung to an earnings before interest and tax profit of about RM29mil from a RM9mil loss in 4Q25.
For FY26, core earnings fell about 20% y-o-y to RM188.9mil, but beat both RHB Research’s and consensus full-year forecasts by about 13%.
In its report, the research firm upgraded the stock to a “buy” (from “neutral”) with a RM1.46 target price.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said going into 1Q27, Sports Toto had guided for flattish y-o-y performance in its O segment, while the outlook for H.R. Owen remains uncertain.
That said, HLIB Research expects quarter-on-quarter improvement, mainly supported by the United Kingdom’s September number plate registration season.
“Looking further into FY27, we forecast O revenue to grow by about 6% versus normalised growth of 5%, supported by the reopening of 19 outlets in Kedah in 2Q27 following the Federal Court’s ruling in August.
“For H.R. Owen, we expect a flattish performance, primarily clouded by the continued outflow of high-net-worth individuals from the United Kingdom and cautious discretionary spending,” said HLIB Research, which kept its “hold” rating on the stock.
Coming to Budget 2027, an analyst does not think there would be a gaming tax or pool betting duty, following the additional 2% service tax imposed on O operators in 2024.
He said the absence of another gaming tax increase, coupled with the potential resumption of operations in Kedah, could provide further support for Sports Toto’s earnings outlook and valuation.
