Special draw reductions should have minimal impact on NFOs

KUCHING: Numbers forecast operators (NFOs) are not expected to be significantly impacted by the plans to reduce the number of special draws beginning 2019, analysts say.

Earlier this week, the government announced that it plans to reduce the number of special draws for all NFOs beginning 2019.

The reduction 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.

The quantum of reduction has not been revealed, but it was mentioned that the new policy would be announced in Budget 2019 on November 2.

“Earnings impact should be insignificant for NFOs unless there is a steep cut in the number of special draws,” AllianceDBS Research Sdn Bhd (AllianceDBS Research) said in a report.

It noted, “In 2017, Magnum obtained 26 special draws while Berjaya Sports Toto ( BToto) secured 22 special draws.

“In our models, we have assumed that both Magnum and BToto will each secure 22 special draws per annum for the financial year 2018 ( FY18) to FY20, bringing the total draws per annum to 178 draws (156 normal draws and 22 special draws) for each NFO in FY18 to FY20.”

Its sensitivity analysis showed that reduction in one special draw would lead to about 0.3 per cent reduction in earnings for Magnum and BToto each.

“Therefore, unless the authorities announce a sharp reduction (more than 15) in the number of special draws, we do not anticipate significant impact to the NFOs. In an extremely bearish scenario, where the authorities do not award a single special draw, earnings risks for both NFO players would be about seven to eight per cent,” the research team suggested.