Berjaya Corp Bhd’s (BCorp) unit in Vietnam is close to receiving a gaming licence in the country — probably the first such permit to be given out there, sources say.

The licence will be awarded to BCorp’s 80%-owned subsidiary Berjaya Lottery Vietnam Ltd (BLVL), in which the group’s gaming arm Berjaya Sports Toto Bhd holds the remaining 20% stake, the sources add.

At the present time, it is not clear if the licence is for the lottery or for a number forecast operator (NFO) offering 4D and lotto games. The lottery in Vietnam is now under state governance, with the earnings channelled into public amenities.

If all goes well, the licence bodes well for BCorp. It would mean the emergence of another cash cow in the group besides BToto, in which it holds a 48.26% stake.

Going by BToto’s earnings track record — an annual profit of over RM400 million — Vietnam could prove to be a  lucrative market for the company. Its population of over 80 million would offer BCorp a much larger market than Malaysia, which is about one-third its size. Additionally, Vietnam is a non-Muslim country, which means it has a bigger target group to reach out to.

Additionally, competition is heating up at home, considering that BToto has lost its monopoly on jackpot games. Magnum 4D was given the licence to launch its Jackpot-4D games in September last year.

Analysts say the drop in 2Q earnings could be an indication of BToto’s declining market share. It was the only NFO to report a contraction in revenue in the last reporting season. Both revenue and net profit for 2Q ended Oct 31, 2009, slipped 9% to RM857.1 million and RM102.5 million respectively.

For the first six months ended Oct 31, 2009, BToto posted a net profit of RM204.7 million on the back of RM1.7 billion in revenue.

BToto’s 20% stake in BLVL will therefore enable it to tap a new market to boost future earnings. If the licence is for 4D and jackpot games — which are new to Vietnam — Berjaya group could have the whole pie to itself.

Be that as it may, there is no record of NFOs, including BToto, having done well overseas.

BToto has operations in the Philippines via an 88.26% stake in Prime Gaming Philippines Inc (PGPI). According to PGPI’s results for the quarter ended Oct 31, 2009, revenue was 375.7 million pesos (about RM28 million) while net profit was 155.3 million pesos (about RM11.5 million) — much lower than what BToto makes at home.

Like it or not, BCorp’s venture in Vietnam will remind investors of Magnum’s fruitless effort, no thanks to regulatory issues, to expand in the Indonesian market years ago. But it may not be a fair comparison because Vietnam is not a Muslim nation. It could be a whole different ball game.

Still, analysts are uncertain about BCorp’s Vietnam foray as there are still a lot of unresolved issues. The gaming industry there remains a fragmented one. The lottery, in particular, is carried out by the provincial governments, with no centralised regulations.

Given that the lottery provides part of the government’s earnings, analysts say things may not be easy for BCorp. The provincial authorities would be protective about their own business. “It would be better to work on a joint- venture basis,” says an analyst.

An industry observer in Vietnam notes that it would be a tough operating environment there.

“We have the lottery throughout Vietnam — on a national and provincial scale. But the lottery is under state governance and management, meaning that no private companies are allowed to operate the lottery in Vietnam. In Vietnam, we have a banner that says ‘buying the lottery is to construct the country’ because earnings from the lottery, under state management, will be used to build public utilities, including hospitals, schools, infrastructure and so on.

“In regards to electronic gaming, like jackpots, only three or four-star hotels that are licensed by the government are allowed to operate electronic games on their premises. However, only foreigners or Viet Kieu — Vietnamese living overseas — are allowed to play electronic games provided by licensed operators,” the observer says.

There are also restrictions on the locals with regard to gaming activities.

So, questions remain on whether BCorp can replicate its gaming success in Vietnam. Should it succeed, however, it would hit the jackpot.

Meantime, the investing public seems to have got wind of the gaming licence. BCorp’s share price rose nine sen or 7.6% to an intraday high of RM1.28 last Friday before finishing the week at RM1.22.

This article appeared in Corporate page of The Edge Malaysia, Issue 792, Feb 8 – 14, 2010