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Broker's take: Maybank KE remains positive on Malaysia's 4D operators
MAYBANK Kim Eng has remained positive on Malaysia's number forecast operators (NFOs), maintaining "buy" calls on Magnum and Berjaya Sports Toto, which are both listed on Bursa Malaysia.
It has a target price of RM2.51 for Magnum, which was trading at RM2.25, up two sen or 0.9 per cent, as at 12.23pm on Monday. Meanwhile, its target price is RM2.88 for Berjaya Sports Toto, whose shares were trading flat at RM2.20.
In a research note on Sunday, analyst Yin Shao Yang noted that NFO jackpot sales, which make up about one-fifth of industry sales, were already at 78 per cent of their pre-movement control order (MCO) levels just two-and-a-half weeks after the June 17 reopening of NFO outlets.
Mr Yin said this rapid recovery could be due to two factors. NFO sales per person tend to be small and hence not so sensitive to fluctuations in disposable incomes. Next, gamblers are less averse to visiting NFO outlets as they are not enclosed areas.
As for Classic 4D sales, which account for about 80 per cent of industry sales, Maybank Kim Eng believes it could also possibly reflect a similar recovery trend.
The brokerage is also not discounting the possibility that more special draws may be awarded for the government to "claw back" RM500 million (S$162.5 million) in taxes foregone while the NFO outlets were closed.
When they were shut from March 18 to June 16, the NFO outlets had foregone 40 draws - 39 normal draws and one special draw - which represented around a quarter of the total number of draws per annum.
Maybank Kim Eng estimates that the NFO sector contributes around RM2 billion in taxes per year.