KUALA LUMPUR, June 3 — Analysts are bullish on Berjaya Sports Toto’s performance as not only legalised betting but the present environment for the upcoming World Cup is also expected to boost its revenue.
The environment in which the upcoming World Cup football matches would be taking place will be similar to the previous event in 2006, where the number of forecast operators (NFO) in Malaysia grew by six per cent then.
During 2006, the World Cup was held in a different time zone for Malaysia, aided by a friendlier regulatory environment and there was no issue of foreign workers being deported. It is expected to be the same this year.
Amid this, ECM Libra Investment Research today maintained its earning estimates for Sports Toto and recommended a ‘Buy’ on the gaming stock at a target price of RM4.91.
“Although Sports Toto is not expected to receive much from the touted one per cent on retail sales commission payable by sister firm, Ascot Sports, we believe legalised sports betting will actually boost revenues,” it said in its research note.
Unlike 2006, the World Cup in 2002 saw a drop of 2.5 per cent in the local NFO industry as the betting was carried out in Japan and Korea which are in the same time zone as Malaysia. This encouraged a greater shift to illegal sports betting.
Besides that, the nationwide deportation of foreign workers in July and August 2002 also led to a loss of clientele as foreign workers accounted for five to 10 per cent of visits to the betting outlets.
Adding to that, the 2002 World Cup was dealt with an array of negative regulatory changes, including an increase in gaming tax to eight per cent in October 1998 from seven per cent previously and a hike in pool betting duty to 10 per cent from seven per cent in November 1998.
The higher taxes then had caused the NFOs to reduce their prize payouts in order to maintain margins, thus providing illegal players and sports betting operators the opportunity to wrest market share with their higher prize payouts, the research house said.
But with new games coming in now, NFOs are expected to hold their own against illegal NFOs and sports betting operators during the World Cup 2010.
It said that lotto revenues would also rise in tandem with jackpot sizes.
Taking a leaf out of history, increased outlet visits driven by large jackpots led to higher revenues for both lotto and non-lotto games (4D, 5D and 6D), it said.
“We expect increased outlet visits driven by sports betting to again lead to overall revenue growth, as sports betting punters who are not regular NFO punters bet on not only sports but mainstay NFO games,” it said. — Bernama
