This article first appeared in The Edge Financial Daily on October 20, 2017

Berjaya Sports Toto Bhd
(Oct 19, RM2.43)
Maintain hold with an unchanged target price (TP) of RM2.50: It was reported that Berjaya Sports Toto Bhd (BToto) is retiring its Lotto game variant Grand Toto 6/63 and replacing it with the new Star Toto 6/50 starting from tomorrow.

The final Grand Toto 6/63 draw was on Wednesday and the prize money from Grand Toto that is not won will be allocated to Star Toto 6/50 Jackpot 1, Power Toto 6/55 and Supreme Toto 6/58 in proportion to the games’ odds of winning.

We opine that it is a positive move as it will help to revive the interest on its Lotto games while punters are able to play the game at a lower cost and stand a higher chance of winning.

We believe Star Toto is likely to draw more interest as it is cheaper for punters to play, given that the ticket price is selling at RM1 compared with RM2 for Grand Toto.

Besides, the better odds of winning in terms of probability (a one in 15.9 million chance to win the Jackpot in Star Toto versus a one in 67.9 million chance in Grand Toto). More prizes (seven prizes) to be won as compared with Grand Toto (four prizes) would also entice more punters to play.

The actual payout of the game would normalise closer to the theoretical payout of 55% as it draws more ticket sales into the pool in proportion to the minimum Jackpot at RM1.18 million, statistically speaking. This would bring stability to the payout of the game and earnings barring any luck factor.

Historically, Lotto games account for about 7% of total sales and the obsolete games have been very challenging in gaining traction. Hence, changing the game variant with more features and higher chances of winning would bring more excitement.

Risks: A higher-than-expected prize payout ratio; cannibalisation from Magnum Bhd and Pan Malaysia Pools Sdn Bhd; and hikes in pool betting duty/gaming tax.

Despite the recent retracement in share price, BToto remains unexciting given the lack of fresh catalyst and a challenging operating environment amid rampant illegal operators. There are also uncertainties over the ongoing disputes on the interpretation of the goods and services tax and the trend of the Inland Revenue Board’s of going hard on retrospective tax claims. — HLIB Research, Oct 19