Reduction of special draws in 2019 to have minimal impact on NFO players

KUCHING: The reduction of special draws, as proposed by the new government, is unlikely to have much impact on number forecast operator ( NFO) players, analysts project.

According to the research arm of Kenanga Investment Bank Bhd ( Kenanga Research), the reduction of special draws in 2019 should have minimal impact to the NFO players as these draw come with 10 per cent additional tax which crimp profitability.

“Our estimate that assuming special draws are reduced to 10 from 22 previously, both players will see their earnings drop by two to three per cent,” Kenanga Research said, referring to Berjaya Sports Toto Bhd ( Berjaya Toto) and Magnum Bhd ( Magnum).

Meanwhile, Affin Hwang Investment Bank Bhd highlighted that if the new government’s intention to reduce special draw by the NFOs beginning 2019 were to be implemented, earnings for Magnum and Berjaya Toto will likely to fall from financial year 2019 (forecast) FY19F onwards.

“Based on our estimates, Magnum and Berjaya Toto’s earnings will be reduced by 0.3 per cent and 0.7 per cent respectively for every one special draw reduction,” the research firm noted.

In its second quarter of current year 2018 (2QCY18) results review, Kenanga Research went on to point out that while NFOs are certainly dividend-yield plays, casino stocks are for those seeking a growth story.

The focus still remains on casino operators over NFO players given the new market in Japan as well as the Genting Integrated Tourism Plan (GITP) growth story in the highlands resort, it said.