AFTER three-and-a-half-month of hiatus – no thanks to the imposition of total lockdown since June 1 – number forecast operators (NFOs) can rejoice following the Finance Ministry’s (MOF) green light to resume operation today with the first draw (post-reopening) slated for tomorrow (Sept 15).
CHS-CIMB Research gathered that all NFO outlets will reopen concurrently (including those in states under Phase 1 of the National Recovery Plan, ie Johor and Kedah) except a few in enhanced movement control order (EMCO) areas where approval from the respective local councils may be needed.
“We also note that there are no major changes to the standard operating procedures (SOPs) in place at the outlets, save for the requirement for punters to be fully vaccinated against COVID-19,” observed analyst Sherman Lam Hsien Jin in a gaming sector update.
“Nonetheless, we believe this development will improve sentiment on NFOs and re-rate both Magnum Bhd and Berjaya Sports Toto Bhd (BST) positively in the near term.”
Based on observations from past MCOs, CGS-CIMB Research expects NFO sales to recover gradually at first before swiftly rebounding to 60-70%/80-85% of pre-pandemic levels after just half to one month post-reopening (ie by end-September/mid-October).
“Thereafter, we expect a sequential return to pre-pandemic levels by end-CY2021F. This may be helped by pent-up demand from punters, increased full vaccination rates and gradual lifting of social restrictions,” projected the research house.
In the near term, however, CGS-CIMB Research expects NFO sales to plunge further quarter-on-quarter (qoq) in 3Q CY2021F (2.5 months of closures vs only one month of closure in 2Q CY2021) before recovering qoq in 4Q CY2021F on the back of a full quarter of operations coupled with quick NFO sales recovery.
“Hence, we see Magnum and BST both posting core net losses in 3Q CY2021F before returning to the black in 4Q CY2021F,” noted the research house.
All-in-all, CGS-CIMB Research reiterated its “overweight” rating on the Malaysian gaming sector.
“Key potential re-rating catalyst include full NFO sales recovery towards end-CY2021F,” opined the research house.
“We continue to prefer Magnum over BST given the former’s pure NFO exposure and the potential monetisation of its stake in U Mobile. Magnum/BST offer attractive CY2022-2023F dividend yields of 7.7-7.8%/5.9-8.5% per annum. The downside risk is further COVID-19 waves.” – Sept 14, 2021
Photo credit: Borneo Post Online