NST Business
KUALA LUMPUR: Berjaya Sports Toto Bhd’s earnings will likely take a hit if the government decides to go ahead to reduce the number of special draws in 2019, as part of the government plan to reduce the social impact related to gaming, Affin Hwang Capital said.
Details of the cut would only be revealed in the upcoming budget 2019 on November 2, Affin Hwang said.
The firm estimated that Berjaya Sports Toto had netted RM17 million in revenue for each draw day in financial year 2018.
Affin Hwang said the cut down in draw days was not good for number forecast operators (NFOs).
“The reduction in draw days will have a negative impact on overall revenue, as the increase in revenue per draw day is unlikely to compensate for the loss of a draw day.
“The cut in draw days is also likely to reduce the attractiveness of jackpot based games as we believe it might take a longer period for jackpot games to accumulate a sizeable prize pool to attract more customers.”
It added that as the industry was already facing fierce competition from the illegals operators, the cut in draw days would certainly not do the NFOs any favours.
“As the cut in draw days will only start in 2019, the full impact of the cut is likely to be reflected in Berjaya Sports Toto’s earnings in financial year 2020.
“The negative impact in FY19 will be cushioned by an earnings boost during the ‘tax-free’ period from June-August 2018.
“Based on our estimates, the net profit of Berjaya Sports Toto is likely to reduce by 0.5-1.0 per cent for each draw day withdrawn.”
Affin Hwang kept its “sell” call and target price at RM 2.20 unchanged at the moment, pending the details from the government on the cut of special draw day.
ends