NFOs to have temporary financial impact from MCO closure
KUCHING: Number forecast operators (NFOs) are expected to have temporary financial impact from the movement control order (MCO) closure.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) recapped that NFOs have temporary closed their operations during the 42-day MCO imposed by the government to contain the Covid-19 outbreak.
“The temporary closure of Berjaya Sports Toto Bhd (Berjaya Sports Toto) and Magnum Bhd’s gaming operations for 42 days does not alter our positive stance for Berjaya Sports Toto and Magnum,” the research firm said.
“We understand that 19 draws, out of 167 draws in financial year 2020 (FY20), will be lost during the MCO.”
As such, AllianceDBS Research has revised its earnings estimates accordingly on the respective companies, whereby the research firm estimated that Berjaya Sports Toto and Magnum’s earnings to drop by approximately 12 per cent and 13 per cent, respectively due to the MCO.
“Another two week extension of MCO will reduce another six draws for each NFO, which will have about five per cent reduction on their bottomline.
“We wish to highlight that over 85 per cent of Berjaya Sports Toto and Magnum’s operating expenses are variable in nature, which mainly consist of prize payout, betting duty and agency fees.
“This partly helps mitigate the financial impact arising from fewer draws.”
According to AllianceDBS Research, the main catalyst for NFOs continues to be the crackdown on illegal NFO activities.
Even with the recent change of government, the research firm believed that the authorities will remain committed in curbing illegal NFO activities to increase tax revenue collection.
“Improved ticket sales due to punters switching back to the legal NFOs could improve the government’s fiscal position.
“It is estimated that the government has lost more than RM2 billion tax revenue due to illegal NFOs.”