KUALA LUMPUR (Feb 26): Hong Leong Investment Bank (HLIB) Research has downgraded Sports Toto Bhd to “hold” at RM1.52 with a lower target price (TP) of RM1.57 (from RM1.86).
HLIB said Sport Toto’s 2QFY2024 core net profit came in at RM29 million (-52. 7% q-o-q, -48.1% y-o-y), bringing 1HFY2024 sum to RM90.5 million (-30.9% y-o-y).
In a note on Monday, the research house said the results came in below house estimate of 38% and street estimate of 42%.
It said the negative deviation was due to lower-than-expected revenue and higher-than-expected operating cost.
“The weak performance during the quarter was due to lesser number of draws, higher prize payout as well as creeping operating costs.
“We cut our FY24-26f forecasts by 13-20%, mainly as we impute lower revenue assumption, while at the same time raising our cost projections,” it said.
HLIB said post earnings revision, its TP is lowered to RM1.57 (from RM1.86 previously).
“Our DCF-derived TP is based on a WACC of 9% and TG of 1.5%. Given the limited upside, we downgrade our rating on Sports Toto to Hold (from Buy previously),” it said.
Source: TheEdge - 27 Feb 2024
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