The Star reported that the government plans to reduce the number of special draws for all number forecasting operators in year 2019F. The announcement of this new policy will be made during Budget 2019, scheduled to be tabled on 2 November 2018.
The government is reducing the number of special draws for the NFOs to cut down on the number of gambling days so that there will not be social ills such as gambling addiction.
We do not know whether the government is reducing the number of special draws to zero or just cutting down the number of special draws.
Like Magnum Bhd, this development is negative for Berjaya Sports Toto (BST). The 22 special draws were about 12.4% of BST’s 177 draws in FYE4/18.
Assuming the number of draws fall by 22 from 177 to 155, BST’s FYE4/20F net profit would decline by 13.3%.
We do not know if the lottery operators would reduce their prize monies to maintain their operating profit margins.
Reducing the prize monies is not a viable option as it would encourage punters to patronise the illegal operators. The illegal operators are paying prize monies which are 20% to 30% higher than the legal operators.
Maintain SELL on BST with a fair value of RM2.42/share.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....