Sports Toto Bhd (Sports Toto) reported a net profit of RM46.4m for 4QFY22, jumping 52.3% YoY due to stronger contribution from the gaming operations following a full resumption of business. For full-year FY22, the Group’s net profit of RM161.6m (-10.9% YoY) was broadly in line with expectations, accounting for 105% and 95% of our and consensus estimates, respectively. We tweak our FY23-25F earnings forecasts by <1% mainly due to housekeeping changes. We maintain our Trading Buy call and DCF-based TP of RM2.20. A fourth interim cash dividend of 3.0sen per share was declared. The Group also announced a share dividend distribution of approximately 11.2m shares on the basis of 1 treasury share for every 120 existing ordinary shares held, which works out to be about 1.7sen per share. With this, the total dividend distribution for FY22 is about 8.7sen per share (FY21: 8.0sen per share).
- 4QFY22 revenue rose 29.6% YoY to RM1.5bn, attributable to stronger contribution from Malaysia’s gaming operations as well as motor dealership sales in the UK. Sports Toto Malaysia (STM) registered a 47.8% growth in revenue due to higher number of draws i.e. 42 draws against 28 draws in 4QFY21. The gaming operations were affected in the previous year’s corresponding quarter due to the implementation of the 3rd Movement Control Order. Meanwhile, HR Owen revenue grew 17.1% due to higher sales from both new and used car sectors.
- 4QFY22 net profit rose 52.3% YoY. In tandem with the increase in revenue, gaming operating profit jumped 79.3% YoY with margin improving by 2.3 ppts to 12.9%. However, HR Owen posted a 44.3% decline in operating profit due to higher operating expenses.
- Outlook. Based on FY22 revenue, operations have so far recovered to ~80% of pre-pandemic level. As FY22 was still partly affected by lockdown measures while we have now fully transitioned to the endemic phase of Covid-19, we believe the Group could revert to normalcy by FY23F. Number forecasting operations are often seen as recession-proof due to its relatively small betting size. Hence, we reckon that Sports Toto’s gaming business should be more resilient compared to other sectors of the economy during a period of challenging economic environment.
Source: PublicInvest Research - 24 Aug 2022