Investment Highlights

• We met up with Sports Toto (ST) recently. According to Bloomberg, ST is trading at a FY25F PE of 9.6x vs. Magnum’s 10.5x. ST’s FY25F dividend yield is estimated at 6.3%, which is close to Magnum’s 6.5%. We attach a neutral 3-star ESG rating to ST.

• ST’s ticket sales have recovered to pre-pandemic levels. ST’s ticket sales are forecast to be more than RM3bil in FY24. Ticket sales per draw are estimated to be grow by 3%-5% each year. Industry ticket sales could be higher if there were no illegal NFOs. The size of illegal NFOs in Malaysia is estimated at 2x-3x bigger than the legal industry’s sales of RM8bil-RM9bil per year.

• Stricter enforcement and penalties could deter illegal operators. The amalgamation of 4 Gaming Acts into one may help. In May 2023, the Prime Minister said that the Common Gaming Houses Act 1953, Pool Betting Act 1967, Lotteries Act 1952 and Betting Act 1953 are being reviewed.

• Berjaya Philippines’ landfill project in north Manila has commenced operations. Phase 1 of the project encompasses 38ha. The concession period is 25 years. The landfill has a capacity of 1,000 tonnes per day. We understand that earnings from the project would not be significant.

• Incidentally in May 2024, Naza Corp Holdings acquired Berjaya Enviro Holdings for RM700mil from Berjaya Corp. Berjaya Enviro operates the integrated waste management park called Bukit Tagar Enviro Park in Hulu Selangor.

• Apart from landfill, Berjaya Philippines has operations in auto (Mazda and commercial trucks), hotel and F&B businesses (Papa John’s Pizza) in Philippines. Berjaya Philippines accounted for an estimated 22% or RM50mil of ST’s net profit in FY23.

• HR Owen in the UK is expected to perform better in FY25F on the back of higher sales volume and improvement in operating profit margins (9MFY24 pre-tax loss: RM4.1mil). The division was affected by increases in depreciation and interest expenses in respect of the new headquarters, showroom and service centre in Hatfield, in FY23 and FY24E.

• About half of HR Owen’s revenue come from new car sales while another half are from sales of pre-owned vehicles. Some of the cars sold by HR Owen are Ferrari, Bugatti and Lamborghini.

• ST is currently trading at a consensus FY25F PE of 9.

Source: AmInvest Research - 10 Jul 2024