-  Maintain HOLD on Berjaya Sports Toto Bhd (BST) with an unchanged fair value of RM4.40/share.

-  BST has declared a share dividend in 3QFY14 on the basis of one treasury share for every 43 shares held. The value of the share dividend translates to 9.5 sen/share.

-  This brings total gross DPS to 19.5 sen in 9MFY14. For FY14F, we have forecasted BST’s gross DPS at 25 sen/share (FY13: 28 sen), which implies a yield of 6.5%.

-  We understand that Berjaya Philippines is diversifying into real estate activities in United Kingdom (UK) as its gaming concession is expiring in 2015F and there is no guarantee that it would be renewed.

-  We also gather that Sports Toto Malaysia Sdn Bhd and BST would not be extending any financial assistance to Berjaya Philippines if additional funds are needed to finance its projects.

-  Recall that recently, BST’s subsidiary, Berjaya Philippines acquired 50% + 1 share in RBW Holdings Ltd for 50,001 pounds (RM272,985). BST also extended a loan of 300,000 pounds (RM1.6mil) to RBW. RBW was incorporated for the purpose of acquiring and developing real estate in United Kingdom (UK) with a focus on London.

-  BST’s 9MFY14 results were below our expectations and consensus estimates due to investment-related expenses.

-  BST recognised investment related expenses of RM10.2mil in 3QFY14 and RM33.6mil in 9MFY14. The expenses were in respect of the listing of STM Trust in Singapore, which was subsequently cancelled, and acquisition of HR Owen PLC in UK.

-  Included in BST’s 9MFY14 results was contribution from HR Owen, which recorded revenue of RM344.7mil and EBIT of RM2.3mil.

-  Ticket sales remained weak in spite of the Chinese New Year festivities in 3QFY14. Ticket sales per draw fell by 3.5% YoY to RM16.7mil in 9MFY14. Comparing 3QFY14 against 3QFY13, ticket sales per draw slid by 1.6%. Like Magnum Bhd, BST’s revenue was affected by soft consumer spending and competition from illegal operators.

-  We estimate that BST’s prize payout had increased from 63.2% in 9MFY13 to 64.2% in 9MFY14. On a QoQ basis, we reckon that prize payout inched up from 64.5% in 2QFY14 to 65.1% in 3QFY14. BST’s net borrowings amounted to RM302.9m.

Source: AmeSecurities