KUALA LUMPUR (Aug 18): Sports Toto Bhd (KL:SPTOTO) is set for a stronger year in the financial year ending June 30, 2027 (FY2027) after Malaysia’s top court rejected the Kedah government's bid to reinstate a ban on lottery operations, clearing the way for outlets to resume business in the state.
On Aug 12, Malaysia’s highest court denied the Kedah state government’s appeal to resume a ban on lottery operations, which since 2023 has prevented lottery operators such as Sports Toto from opening their physical outlets in the state despite holding legal licences.
“We estimate the resumption could provide a mild, about 3% uplift to the lottery business despite an unclear timeline at present,” said RHB Research in a note. “This could potentially provide a buffer to the structural challenges facing the lottery segment, namely intense competition from illegal NFOs (number forecast operations) due to the easy access through digital platforms.”
Reflecting the stronger contribution from the others segment, RHB also raised its earnings forecast for FY2027 by 14.2%.
Subsequently, the house raised its recommendation of the group to 'buy', alongside a target price of RM1.46.
Meanwhile, Hong Leong Investment Bank (HLIB) forecasted NFO revenue for Sports Toto to grow an estimated 6%, supported by the planned reopening of 19 Kedah outlets in the second quarter ending Dec 31, 2026 (2QFY2027).
Subsequently, for the whole FY2027, it raised its earnings estimate by 3%.
For 4QFY2026, earnings surged 55% year-on-year to RM62.5 million.
The house noted that the jump was underpinned by the group’s stronger-than-expected computerised waging and voting businesses under the “others” business segment.
HLIB cautioned that Sport Toto’s car dealership segment HR Owen could remain subdued throughout the year amid weakened consumer sentiment, alongside softer new and used car sales.
“For HR Owen, we expect flattish performance, primarily clouded by the continued outflow of high-net-worth (HNW) individuals from the UK and cautious discretionary spending,” said HLIB in a separate note. The house chose to maintain its 'hold' rating on the stock, but its target price was raised to RM1.35.
At present, analysts remain conflicted about Sports Toto, with the six research houses tracking it on Bloomberg split evenly on its ratings. The stock currently has two 'buy', two 'hold' and two 'sell' calls, with a 12 month average target price of RM1.35 per share.