Forecast of moderate growth for NFOs
PETALING JAYA: Softer quarters are expected ahead for number forecast operators (NFOs) as ticket sales are expected to normalise sequentially following the strong performance in the first quarter of this year (1Q25), analysts say.
The strong performance earlier in the year was boosted by Chinese New Year and high jackpot run, said RHB Research.
Beyond the immediate term, illegal NFOs continue to pose strong competition, having gained market share during the Covid-19 pandemic and after the restrictions on legal operations in the northern states of Peninsular Malaysia in 2023.
The NFOs are currently awaiting a court decision to resume operations there, which would help them regain some lost ground.
While stricter enforcement against illegal NFOs and the legalisation of online gaming could be potential catalysts for the sector, these measures do not appear to be a priority for the government at this stage, the research house said.
It believes the mean valuation of NFOs is fair, as it reflects their defensive nature and limited growth catalysts, while offering an attractive 5% to 7% yield.
Among the stocks, RHB Research favours Sports Toto Bhd for its compelling valuation and superior yield.
It stands out as a top choice for investors seeking high income stability with limited upside from growth drivers in the sector, making it a strong defensive pick, it added.
RHB Research retained its 'neutral' rating on the stock.
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