PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 5 Dec 2019, 9:14 AM


Berjaya Sports Toto Berhad - Higher Gaming Profit On Lower Prize Payout

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Berjaya Sports Toto (BToto) reported solid 4QFY19 results with net profit doubling to RM70.2m. This was mainly driven by higher gaming profit on lower prize payout as well as lower operating expenses. The full-year results beat our estimates by 10% but were within market expectation. Revenue was in line with our estimates but the discrepancy in our earnings forecast was largely due to lower-than-expected prize payout and higher motor dealership margin. We revise up our FY20-21F earnings forecasts by 6-7% to factor in a higher margin for the motor division. As such, our TP increases from RM2.15 to RM2.30. We maintain our Neutral rating on BToto. A fourth interim dividend of 4.50 sen per share was declared, bringing its FY19 total dividend per share to 16 sen (remained unchanged compared to FY18). This represents a dividend payout of 78%, lower than FY18’s 94%.

  • 4QFY19 revenue was flat but net profit doubled to RM70.2m. Revenue was flat as a 17% increase in motor dealership revenue was offset by a 43% drop in revenue from the Philippine Gaming Management Corporation (PGMC) due to lower lease rental income. HR Owen registered higher revenue due to higher sales driven by new model launches in the new car segment. Malaysia’s gaming revenue was flat as it achieved higher revenue per draw despite a drop in the total number of draws. However, net profit jumped by 99.5% mainly due to lower prize payout. In addition, the Malaysian gaming operations also incurred lower operating expenses. Despite higher revenue, HR Owen reported a 46% drop in pre-tax profit on higher operating and investment-related expenses. Nevertheless, motor dealership margin for full-year FY19 improved from 1.8% to 2.4%.
  • 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 are forecasting a flattish earnings growth for BToto in the long run with our projected 3-year earnings CAGR at - 1%. However, FY20F dividend yield remains attractive at c.6%. Hence, we maintain our Neutral recommendation with revised TP of RM2.30.

Source: PublicInvest Research - 19 Jun 2019

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