Berjaya Sports Toto (BToto) reported a 4QFY21 net profit of RM30.5m compared to a net loss of RM43.3m in the previous year’s corresponding quarter. Revenue more than doubled to RM1.12bn due to higher gaming and motor dealership contribution as 4QFY20 was significantly affected by the initial wave of Covid-19 pandemic. However, the full-year results came in below our and market expectations due to the impact of MCO 3.0, which led to closure of number forecasting operations in Malaysia. We cut our FY22-23F earnings forecasts by 6-13% after factoring in the impact of lockdown and a weaker consumer spending on its gaming operations in Malaysia. As a result, our TP is revised to RM2.40. No dividend was declared for the current quarter. For FY21, a total dividend of 8.0sen per share was declared, translating to a lower dividend payout of 59%. As we expect a gradual reopening of the domestic economy to result in a resumption of the NFO operations in FY22F, we maintain our Outperform call on BToto.

• 4QFY21 revenue jumped 137% YoY, mainly due to higher contribution from both gaming and motor dealership segments. Gaming revenue stood at RM449.7m in 4QFY21 compared to only RM67.8m in 4QFY20 as the number of draws was sharply lower during the implementation of MCO 1.0. There were 28 draws conducted in the current quarter as compared to only 6 draws in 4QFY20. Meanwhile, HR Owen posted a 72.4% increase in revenue as last year’s performance was affected by temporary shutdown of operations in the UK.

• Posting 4QFY21 net profit of RM30.5m. Losses reported in 4QFY20 were largely due to the initial impact of Covid-19 pandemic on both its domestic and overseas operations. Although the group’s performance was impressive on a YoY basis, cumulative FY21 earnings fell short of expectations due to the impact of the resurgence of Covid-19 cases in 2HFY21, which resulted in a nationwide lockdown.

• Outlook. The prolonged lockdown of the domestic economy is expected to result in weaker consumer spending on non-essentials, especially in 1HFY22F. Therefore, we cut our FY22-23F earnings forecast by 6-13%. However, earnings momentum should improve in 2HFY22F, given the expectation that Malaysia would achieve herd immunity by this year end. Although dividend payout ratio was lower at only 59% in FY21, we expect an improvement in FY22F, translating to an attractive yield of 5%.

Source: PublicInvest Research - 23 Aug 2021