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Author: PublicInvest   |   Latest post: Tue, 10 Dec 2019, 9:35 AM

 

Berjaya Sports Toto Berhad - Lower Gaming Profit

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Berjaya Sports Toto (BToto) reported a 2.3% decline in 2QFY19 net profit to RM60.3m. Motor dealership delivered stronger earnings but this was offset by lower contribution from gaming operations due to higher prize payout. Although 1HFY19 accounted for 59% of our full-year estimate, we consider the results to be within expectation as we believe gaming profit would be lower in 2019 due to the 50% reduction in number of special draws. A second interim dividend of 4sen per share was declared, bringing the total dividend distribution to 8sen per share for 1HFY19 (1HFY18: 8sen), which was in line with our forecast. We maintain our Neutral rating on BToto with an unchanged TP of RM2.15.

  • 2QFY19 revenue and net profit dropped 2.3% YoY. Sports Toto reported a drop in revenue as the previous corresponding quarter registered higher sales due to the Grand Toto 6/63 game. As a result of higher prize payout, Sports Toto pretax profit fell by 13.4%. Meanwhile, its motor dealership business, HR Owen, posted a slight increase in revenue but it reported a pretax profit of GBP8m in 2QFY19 compared to a pretax loss of GBP0.7m in 2QFY18. The improved results were mainly due to higher sales from the new car segment which provides higher margin.
  • Maintain Neutral. Given the structural issues with persistent competition from non-mainstream gaming operators and that 4D games are becoming less popular among the younger generation, we believe earnings growth will remain subdued for BToto in the long run. For FY19F, we expect earnings to decline by 5% due to a 50% reduction in the number of special draws. However, its FY19F yield remains attractive and is projected at c.7%. Hence, we maintain our Neutral recommendation with an unchanged TP of RM2.15.

Source: PublicInvest Research - 17 Dec 2018

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