NUMBER forecast operators (NFOs) are in for tough times given five months after NFO outlets reopened, the gross of their sales/draw have yet to recover beyond 80-85% of pre-closure levels.
This had led to Maybank IB Research downgrading the sector to “neutral” on the basis that while the industry is relatively resilient, it is not immune to the COVID-19 pandemic.
Recall that NFO outlets reopened on June 17 after being shut for three months following the implementation of the movement control order on March 18.
“We revise our CY2020 gross NFO industry sales/draw growth forecast to -15% year-on-year (yoy) from -10% yoy and CY2021 gross NFO industry sales/draw growth forecast to -5% yoy from +2% yoy,” wrote analyst Yin Shao Yang in a sector update.
According to Maybank IB Research, the gross industry jackpot sales/draw post-reopening has been 20% lower yoy.
“Assuming that gross industry Classic 4D sales/draw is trending the same way, it appears that there is still a 15-20% gap between current and pre-closure gross NFO industry sales/draw,” noted Yin. “In fact, our channel checks have confirmed as much.”
For the record, jackpot games are the only games whose sales can be estimated accurately draw-by-draw due to the ‘snowballing’ feature of their jackpots.
Sales of the more popular Classic 4D game which accounts for about 75% of gross NFO industry sales cannot be estimated accurately draw-by-draw as it lack this ‘snowballing’ feature.
In view of such developments, Maybank IB Research has cut its estimates for Magnum Bhd’s earnings per share (EPS) by 8%-15%, dividend per share (DPS) estimates by one to two sen and target price by 13% to RM2.02.
As for Berjaya Sports Toto Bhd (BST), the research house trimmed the stock’s EPS estimates by 10-17%, DPS estimates by one to two sen and target price by 28% to RM1.95.
“Despite our lower DPS estimates, Magnum and BST still offer dividend yields of circa 6% per annum from FY2021E onwards,” projected the research house.
“Thus, investors may want to “hold” both counters for dividend yields. Between the two, we prefer Magnum, thanks to (i) potential listing of its 6%-owned U Mobile; and (ii) potential resolution to its second tax penalty of RM182.8 mil (13 sen/share).” – Nov 12, 2020
