BST’s earnings to take a hit if govt reduces number of special draws in 2019

KUCHING: Berjaya Sports Toto Bhd’s ( BST) 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.

According to earlier reports, Finance Minister Lim Guan Eng said the new policy would be announced in Budget 2019 on November 2.

“The reduct ion in the number of special draws is an initial step by the government to reduce gambling activities, so as to curb social problems such as excessive gambling addiction,” he said at the Dewan Rakyat sitting recently.

Af fin Hwang Investment Bank Bhd ( Af finHwang Capital) expected the cut in draw days to further contribute to BST’s declining betting revenue which is facing intense competition from the illegals operators.

“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, in our view,” the research firm said in a note yesterday.

“The cut in draw days is also likely to reduce the at tractiveness 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.”

“As the industry is already facing fierce competition from the illegals operators, the cut in draw days will certainly not do the NFOs any favours.”

According to AffinHwang Capital, as the cut in draw days will only start in 2019, the full impact of the cut is likely to be ref lected in BST earnings in financial year 2020 estimate ( FY20E).

The research firm noted that the negative impact in FY19E will be cushioned by an earnings boost during the “tax- free” three-month period from June to August 2018.

“Based on our estimates, the net profit of BST is likely to reduce by 0.5 per cent to one per cent for each draw day withdrawn.

“As BST is already expected to payout close to 90 per cent of its profit as dividend, a cut in earnings will also likely lead to a lower dividend per share.”