SPTOTO: Profit Declines on Wider Motor Dealership Losses, Forecasts Trimmed

Performance Review

Profitability at a leading gaming and motor dealership conglomerate experienced a notable decline in the second quarter of its fiscal year, primarily attributed to widened losses within its motor dealership division. The group reported a 9.2% year-on-year drop in net profit to RM45.1 million for the quarter ending June 30, FY26. Half-year net profit of RM67.2 million fell short of both analyst and consensus full-year forecasts, coming in at just 31% and 35% respectively.

Revenue for the quarter remained largely flat, registering a marginal 0.3% year-on-year decrease to RM1,476.0 million. While the lottery segment saw a modest 3.3% year-on-year increase in revenue, driven by higher average sales per draw, this positive contribution was negated by a 1% year-on-year decline in motor dealership revenue, primarily due to softer new car sales. The motor division also bore the brunt of higher operating expenses, leading to a pre-tax loss of RM15.6 million, significantly wider than the RM7.8 million loss reported in the prior corresponding period.

Outlook and Challenges

Looking ahead, the operating environment for the UK motor dealership business remains challenging, prompting analysts to reduce the group’s FY26-28F earnings forecasts by an average of 9%. This revision reflects expectations of continued higher-than-anticipated losses from the motor dealership operations. On the gaming front, a judicial review against state governments regarding the non-renewal of number forecasting licenses is ongoing. While considered an overhang, its impact on overall group operations is currently deemed immaterial. The group has also continued its share buyback program, demonstrating management’s view on valuation.