Berjaya Sports Toto to benefit from enforcement curbing illegal NFOs

KUCHING: Analysts are positive that Berjaya Sports Toto Bhd (Berjaya Sports Toto) will continue to benefit from the more stringent enforcement by the authorities in curbing the activities of illegal number forecast operators (NFOs).

In its company guide, AllianceDBS Research Sdn Bhd (AllianceDBS Research) remained optimistic on Berjaya Sports Toto’s earnings prospects going forward.

“As a dominant player in the NFO sector, the group has been a beneficiary of the authorities’ more stringent enforcement to curb illegal NFO activities. This has resulted in punters shifting from illegal NFOs to legal operators,” AllianceDBS Research said.

“Although there are no official estimates of the illegal NFO’s market size, we understand that its market size remains large and estimated to be about two-fold of the legalised NFO market despite the more stringent enforcement by the authorities in curbing illegal NFO activities since the second half of 2018 (2H18).

“Therefore, we believe there is still plenty of room for the NFOs to grow their earnings if the authorities successfully reduce illegal NFO activities.”

For 2020, the research firm expected the clampdown on illegal NFOs to further intensify with the enforcement of minimum penalties for both sellers and punters part in the illegal NFO market and potential sector liberalisation to attract punters back to the legal market.

According to AllianceDBS Research, one key development that could serve as a major deterrent to participating in the illegal NFO market is the imposition of punitive minimum penalties on both punters and sellers in the illegal market announced under Budget 2020.

“In Budget 2020, the government has announced a higher minimum mandatory penalty of RM100,000 for punters patronising illegal gambling outfits, along with a minimum mandatory jail sentence of six months.

“For illegal operators, a higher minimum mandatory penalty of RM1 million and a 12-month minimum mandatory jail sentence will be imposed,” it recapped.

The research firm believed that such high penalties and long jail terms imposed on both punters and illegal operators, if enforced and marketed effectively, could greatly discourage both parties from participating in the illegal NFO market.

“This should improve the earnings prospects of the NFOs.”

Aside from increased enforcement, AllianceDBS Research believed that Berjaya Sports Toto’s launch of a complete new game variant (4D Zodiac) in June, without replacing existing games, indicates the increased willingness of the authorities to further liberalise the NFO sector.

The research firm opined that this serves as a positive development for the NFO sector.

“At present, Berjaya Sports Toto offers attractive sustainable yield of more than six per cent. As such, investors could enjoy the attractive yield offered by the group while riding on these investment themes.

“Potential or on-going monetary easing moves by major global central banks and Bank Negara Malaysia ( BNM) could also promote a yield-seeking investing strategy, which favours companies like Berjaya Sports Toto.”