MCO 2.0 another setback for Berjaya Sports Toto

KUALA LUMPUR: The reintroduction of the Movement Control Order (MCO) in parts of Malaysia will be a temporary setback for Berjaya Sports Toto Bhd (Berjaya Sports Toto) as the group will be required to temporarily shut down outlets from January 13 to 26, 2021.

Researchers at Public Investment Bank Bhd (PublicInvest Research) observed that this only affects outlets located in Selangor, Penang, Johor, Sabah, Melaka, Kuala Lumpur and Putrajaya.

“Based on our estimates, should the MCO be implemented over a one-month period, Berjaya Sports Toto’s earnings forecasts for its financial year 2021 (FY21) will see a six per cent reduction,” it calculated. “We revise down our FY21 projection by six per cent while FY22 and FY23 remains unchanged.

“Despite the near term hiccups, we continue to believe that Berjaya Sports Toto’s business is relatively more resilient compared to casino operators within the gaming sector as it should recover quicker once all business operations are allowed to resume.

“Generally, we are of the view that Malaysian economic activities would rebound towards the second half of the year (2H21) when the Covid19 vaccine is made available to a larger population of the country.”

Unlike the previous MCO,

PublicInvest Research saw that only outlets located in the state and federal Territories undergoing MCO will be required to shut down from January 13 to 26, 2021.

Meanwhile, all other outlets in Pahang, Perak, Negeri Sembilan, Kedah, Perlis and Sarawak (undergoing Conditional Movement Control Order and Recovery Movement Control Order) will continue operate as usual.

It is understood that about 60 per cent of Berjaya Sports Toto’s 680 outlets are located in the MCO area.

“Based on our estimate, a twoweek closure will lead to circa three per cent decline in BST’s FY21F earnings,” it estimated .”Although the estimated impact is immaterial, we note that there is still possibility of the MCO being extended, potentially resulting in higher earnings downside.

“Also, we note that this could spill over into the peak period of Chinese New Year where potential loss of ticket sales will be more significant. As such, we cut our earnings estimate for FY21 by six per cent.

“Nevertheless, the adverse impact is not expected to be long-lasting as sentiment and economic activities should pick up towards 2H21 once the Covid-19 vaccine is made available to a larger population of the country. At this juncture, our earnings forecasts remain unchanged.”