- We are keeping our HOLD recommendation on Magnum Bhd with an unchanged fair value of RM3.70/share. Magnum is currently trading 14.4x FY14F earnings. Magnum’s results were within our expectations and consensus estimates.

- We have not accounted for the impact of GST (goods and services tax) in Magnum’s FY15F earnings.

- Magnum declared a gross DPS of 5 sen in 3QFY13, which brings total gross DPS to 15 sen in 9MFY13.

- For the full year, we are assuming a gross DPS of 20 sen, which implies a decent yield of 6.2%.

- Operating cashflows amounted to RM392.0mil in 9MFY13, 30.1% YoY higher. Net gearing stood at 23.3% as at end-Sept 2013 compared with 20.1% as at end-Dec 2012.

- Gross borrowings eased from RM1.3bil as at end-FY12 to RM1.0bil as at end-Sept 2013.

- Ticket sales remained weak, as reflected in the 4.2% YoY decline in 9MFY13. Magnum attributed the softness in ticket sales to a weak economic environment, competition from the illegal operators and high frequency of jackpot strikes.

- On a per draw basis, ticket sales edged down 3.5% from RM19mil in 9MFY12 to RM18.4mil in 9MFY13. There were 133 draws in 9MFY13 versus 134 in 9MFY12.

- In spite of the lower ticket sales, pre-tax profit of the NFO division strengthened 4.8% from RM312.0mil in 9MFY12 to RM327.0mil in 9MFY13. This was partly due to a 43.1% fall in interest expense.

- Prize payout ratio inched down from an estimated 63.7% in 9MFY12 to 63.2% in 9MFY13.

- On a QoQ basis, ticket sales were relatively flat at RM701.7mil in 3QFY13. Magnum carried out 43 draws in 3QFY13 against 44 draws in 2QFY13.

- Ticket sales per draw strengthened 2.6% from RM17.3mil in 2QFY13 to RM17.7mil in 3QFY13.

- We estimate prize payout at 63.1% in 3QFY13 versus 67.7% in 2QFY13. Due to the fall in prize payout, pre-tax profit of the NFO division expanded 42.3% QoQ to RM104.9mil in 3QFY13.

Source: AmeSecurities