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KUALA LUMPUR: Magnum Bhd’s new jackpot game variant dubbed “4D Jackpot Gold” is expected to give its earnings a moderate single-digit rate boost.

Analysts concurred that the new game is rather complicated and lacks the “intuitive” appeal of the classic 4D game, thus any initial boost to earnings is, perhaps, mild.

The new jackpot game was unveiled on Nov 8, which is the second new game introduced within the number forecast operator industry this year.

Maybank IB Research said the new game might boost sales by 2% at most. It pointed out that Magnum has been silent on the prize payout ratio, and thus is unable to make a forecast of the earnings before interest, taxes, depreciation and amortisation margin for 4D Jackpot Gold yet.

While UOB Kay Hian Research head Vincent Khoo expects “modest” top-line contribution from the new game, he noted that it would improve Magnum’s margins as “jackpot games typically command higher profit margins (mid-teens) versus classic 4D (low-teens) due to the lower prize payout ratio”.

Magnum’s operating margin for the six months ended June 30, 2014 stood at 16.1%, down from 17.6% a year ago.

He does not foresee much cannibalisation between the new game and Magnum’s existing games of 4D and 4D jackpot. Khoo believes this would enable Magnum to win market share on the expense of its rivals, particularly Berjaya Sports Toto Bhd’s (BToto) lotto games.

 “Currently BToto is the market leader in the jackpot segment with a 60% market share, which contributes up to 20% of its earnings. Partially contributed by the novelty factor, we expect BToto to concede modest jackpot market share to Magnum,” Khoo said in a Nov 10 report.

“Aside from [forecasted] lower yield, BToto is less compelling due to its venture into other non-core businesses such has HR Owen plc, Atlan Holdings Bhd and REDtone International Bhd,” said Khoo.

“The game may appear to be complicated initially, but punters are very fast learners. I expect punters to [be able to] pick this game up in the next two quarters,” a gaming analyst, who declined to be named, told The Edge Financial Daily.

 

This article first appeared in The Edge Financial Daily, on November 24, 2014.

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