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KUALA LUMPUR: The government has raised the betting duty on gaming companies to 8% from 6% previously, with retrospective effect from last month.

The listed gaming companies — Tanjong plc, Multi-Purpose Holdings Bhd (MPHB) and Berjaya Sports Toto Bhd (BToto) — made the announcement on Bursa Malaysia yesterday.

Gaming analysts do not expect the hike to have a huge impact on the companies in the near term.

“Historically, the gaming companies respond to duty hikes by reducing their prize payout ratio to equalise their margins. But the problem with this is when they do that, illegal operators become more attractive to punters.

“As such, there is a migration from legal to illegal gaming and the legal gaming industry becomes stagnant,” ECM Libra Research’s gaming analyst Yin Shao Yang told The Edge Financial Daily.

“The NFO (numbers forecast operator) market is RM10 billion and 2% of that is RM200 million, which is quite a small sum comparatively and there shouldn’t be much of an impact. “However, there could be an impact on the gaming companies in the long run with greater migration from legal to illegal betting,” he said.

Yin said the full-year earnings per share of Tanjong were estimated to be reduced by 5% while BToto’s will be 11% lower following the tax hike. The smaller impact on Tanjong is due to its more diversified earnings base.  

In its announcement, Tanjong said its wholly owned subsidiary Pan Malaysian Pools Sdn Bhd was notified by the ministry of finance (MoF) on Tuesday of the revision in betting duty to 8% from 6%.

“The new rate applies to draws held from June 2010 onwards. Betting duty is based on gross sales proceeds after deducting gaming tax of 8%. Therefore, the effective rate of betting duty will be 7.36% from 5.52% previously,” it said.

“This revision is not expected to have a material impact on the results of the Tanjong group,” it added.

Similarly, MPHB’s subsidiary Magnum Corporation Sdn Bhd had also received the notice from MoF.


Mixed results at gaming firms
For its first quarter ended March 31, 2010, MPHB’s pre-tax profit at its gaming division rose 32.23% to RM93.49 million from RM70.7 million a year earlier due to an increase in the number of draws, contributions from the 4D Jackpot game and lower finance cost.

Meanwhile, Tanjong saw lower earnings from its gaming division in its first quarter ended April 30, 2010. Tanjong said on Wednesday that gross sales proceeds from its NFO business fell to RM506 million from RM530 million due to lower demand for NFO products arising from the introduction of common draw days for special draws.

“This, together with additional tax payments on special draws, led to a reduction in the gaming segment’s operating profit by RM15 million from RM62 million to RM47 million,” it added.

In its announcement yesterday, BToto said barring any other unforeseen circumstances and taking into account the launch of the new game Supreme Toto 6/58 in March 2010, its board remained optimistic that the operating performance of the group for the financial year ending April 30, 2011 would be good. The group’s net profit for its financial year ended April 30, 2010 fell 8.4% to RM386 million from the previous year following weaker numbers from its gaming subsidiary, Sports Toto Malaysia Sdn Bhd.

BToto fell five sen to a six-month low of RM4.22 yesterday. The stock has been on a downward trend this week following news on Monday that its parent company — Berjaya Corporation Bhd  —  aborted a plan to acquire Ascot Sports Sdn Bhd from chairman Tan Sri Vincent Tan on news that the government had decided not to re-issue a sports betting licence to Ascot.

Tanjong and MPHB also saw their stocks ending the day on a low note yesterday. Tanjong fell 14 sen to RM17.30, while MPHB fell eight sen to RM1.96.


This article appeared in The Edge Financial Daily, July 2, 2010.

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