KUALA LUMPUR: Number forecasts operators (NFO) may consider enhancing their mobile betting applications as the next viable step if Penang, Selangor and Negeri Sembilan flip from red to green in the upcoming state election.
Further, the sentiment in finding an alternate option to continue NFO businesses is exacerbated following the ban of NFOs operation in Kedah and Perlis in January 2023 and industry players not ruling out the possibility of shutting down operations in other key states.
Tradeview Capital Sdn Bhd vice president Tan Cheng Wen said the underlying NFOs business model mainly relies on state government-issued licences, therefore, contingency plans in the event of a change in state government are hard to conceive.
One of the endeavours that NFOs have been working on to address this is to roll out their mobile betting applications.
He said the mobile betting applications will facilitate the NFOs in mitigating long-term earnings impact.
Tan said the three states make up 34 per cent of the store count for Sports Toto and 33 per cent for Magnum, of which any unfavourable change in state government would likely impact the earnings for both companies.
"However, this is also dependent on approval by the federal government as NFOs are bound by the Pool Betting Act 1967, which restricts their business activities within their premises and not for mobile betting applications," he told The New Straits Times.
An industry player who declined to be named said that despite the outcome of the upcoming election, there is a pressing need for the government to review the gaming and gambling policies along with much stricter enforcement.
Last month, Home Minister Datuk Seri Saifuddin Nasution Ismail vowed to amend outdated legislation to fight online gambling, which stakeholders in the gaming industry welcome.
He said allowing the legal NFOs to operate on online platforms will help ensure a level playing field for legal NFOs and mitigate the rampant illegal gambling activities in the country.
"The illegal gambling and gaming operators operate completely online and even on mobile applications compared to the legal NFOs who only operate within its premises to comply with Common Gaming Houses Act 1953," he said.
He reiterated illegal operations that do not comply with the law and tax evasion, which becomes part of the leakages in the country's economy.
Another industry observer pointed out that illegal gambling is still the main problem that bogged down the industry apart from the change of state government in the upcoming state election.
Despite raids and operation busts by authorities, many illegal gambling operators eventually moved towards conducting business online through messaging applications.
"Illegal gambling activities are hurting the industry and need problem-solving. Nonetheless, the change of state government also contributes to the industry's long-term outlook if the state government decides to ban gambling activities in key states like Selangor.
"Selangor houses a lot of NFOs outlets, and if the ban for gambling activities comes through, it will certainly impact the earnings for NFOs like Magnum Bhd and Berjaya Sports Toto Bhd by at least five per cent," another industry player said.
Universiti Tunku Abdul Rahman economics professor Wong Chin Yoong believes Perikatan Nasional (PN) will put up a good fight in the three states, however, the chances for them taking over are rather slim.
"Even if they did and took over the administrations, they probably won't do so, as these states are very different from Perlis and Kedah in terms of demography, educational level and extent of urbanisation.
"The havoc will be much greater as the resistance from the NFOs will also be much stronger when they have much stake to lose.
If you look at the distribution of the retail outlets for Magnum, there are only 55 in total for Penang, Kedah and Perlis, which are located mainly in Penang.
"But for Selangor alone, there are 153, and 29 for Negeri Sembilan. There is too much to lose for the NFOs," he said.
In a recent report, Hong Leong Investment Bank Bhd (HLIB Research) said the Kedah state's decision to ban the operations of Sports Toto had minimal impact on its ticket sales.
The bank-backed research firm added that jittery investor sentiment has led to the decline of NFOs' share price due to the impending polls in the six states.
Nonetheless, HLIB Research reiterated its stance on recovering NFOs' stock price once the policy risk dissipates should the NFOs remain status quo post-state election.
"Further re-rating catalysts for NFOs include the materialisation of gaming laws amendment, which is increasingly likely as the government strives to plug tax revenue leakage to boost the nation's coffer by curbing illegal NFOs, contributing to significant tax revenue losses.
