The number forecast operator (NFO) recorded a 65.3% increase in net profit to RM43.64 million in Q2 FY2023 from RM26.40 million in the same period last year.
Revenue stood at RM537.1 million, marking a 11% year-on-year (y-o-y) increase from RM482.1 million in Q2 FY2022.
The research house expressed in a note today that the status quo outcome of the recent state elections provides a positive indicator to the group’s prospects.
This is particularly true in the states of Selangor, Penang and Negeri Sembilan – about 33% of Magnum’s overall retail locations are located in these three states.
“The political status quo means the company can operate like business as usual, and do not have to fear outlet closures like it faced in Kedah,” RHB said.
“We believe this diminished uncertainty reduces Magnum’s need to hold cash, and could lead to improved dividend payout – potentially expediting the normalisation of its DPS (dividend per share),” it added.
Nonetheless, in maintaining its “neutral” call, RHB said that the increase in DPS in Q2 FY2023 can be attributed to enhanced earnings and a more favourable political climate compared to preceding quarters.
Furthermore, RHB has announced an upward revision of its DPS forecast for the FY2023 till FY2025, now projected at 7-8.5 sen from its previous range of 6-7 sen.
This adjustment was accompanied by a reduction in the weighted average cost of capital, attributed to a “better regulatory environment”.
Moreover, for Magnum to thrive, it would need to either legalise online gaming or implement more stringent measures to curb illicit NFO operations.
The research house observed that Magnum’s gaming earnings remained consistent, hovering around 80% of the 2019 average, mirroring its performance in preceding quarters.
“However, after numerous quarters of above-long-term-average prize payouts of 63%-66%, its prize payout ratio has softened to 62.5%, meaningfully lifting profitability.
“While revenue fell 2% quarter-on-quarter, the better luck in Q2 FY2023 helped lift its net profit by 93%,” said RHB.
However, it mentioned that due to an “increasing conservative political influence” in Selangor, where Magnum operates 18% of its overall outlets, investors will start to closely monitor upcoming elections.
At the close of trade, Magnum Berhad’s share price rose 1 sen or 0.87% to RM1.16, valuing the group at RM1.67 billion.