PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 13 Jul 2020, 10:10 AM


Berjaya Sports Toto Berhad- Earnings Affected By Lockdown

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Berjaya Sports Toto (BToto) reported a net profit of RM48.6m in 3QFY20. As a result of the change in its financial year-end to June 30, numbers for previous year’s corresponding period was not disclosed. However, based on our simple average calculation, 3QFY20 net profit was down 27% YoY due to the implementation of the Movement Control Order (MCO) which resulted in a drop in the number of draws. Stripping out a gain on disposal, 9MFY20 results only accounted for 68% of our full year forecast but within market estimates. Although revenue was in line with our forecast, bottomline was lower-than-expected due to lower cost assumption. We revise down our FY20-22F earnings estimates by 5%-8% to account for a higher cost assumption. Consequently, our DCF valuation is reduced from RM2.85 to RM2.77. We maintain our Outperform rating on BToto as we expect the NFO business to be more resilient and should recover faster once restrictions are lifted. While operations remain closed and given the need to conserve cash, no dividend was declared for the current quarter. Although dividend yield is affected in FY20F, we expect earnings to improve in FY21F, leading to a normalization of yield.

  • 3QFY20 net profit down 21.5% QoQ. Revenue fell 5.3% QoQ due to a 12% decline in gaming revenue. The impact was partly offset by higher motor dealership sales (+4.1% QoQ) on better contribution from the new car segment. However, the Group’s net profit fell 21.5% QoQ as gaming profit declined by 25% due to 6 fewer draws following the imposition of the MCO. In addition, operating expenses have increased. The improvement in motor dealership margin from 1.3% to 2.4% has somewhat helped to cushion the impact of lower gaming profit.
  • Outlook. The number forecasting business has been adversely affected by the MCO but we believe that it would be quicker for the NFOs to recover once restrictions are removed. This, we believe, will be driven by pent-up demand following a long period of suspension. Unlike the casino operators, it is relatively easier for NFO outlets to meet social distancing requirements without affecting the overall ticket sales considerably, once they are allowed to resume operations again. Hence, we reckon the NFO business is more insulated with patrons possibly more inclined to buying number forecasting tickets and refraining from visiting casinos.

Source: PublicInvest Research - 3 Jun 2020

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