News

BToto announced that it would not be proceeding with the proposed listing of Sports Toto Malaysia Trusts (STM-Trust) in Singapore.

Reasons are due to current challenging market conditions and the poor performances of listed yield stocks such as real estate investment trusts (REIT) and other business trusts in Singapore.

Highlights

The announcement came as a surprise to us as we have earlier expected that the trust listing in Singapore to materialize by year-end.

No further details were disclosed on whether the proposed listing would be put on hold temporarily until the uncertainties in Singapore clears up, or to permanently cancel the listing.

There will be no change to BToto’s current operations and business is as usual.

However, we will revert our valuation methodology back to DCF valuation (initial valuation) as there is no longer any need for a holding company discount. BToto will continue to own 100% of Sports Toto Malaysia (STM).

To recall, STM is BToto’s wholly-owned subsidiary who is one of the three number forecasts operator (NFO) in Malaysia. We have earlier changed BToto’s valuation to SOP due to an effective stake of 87.58% in STM post-listing of STM-Trust.

Risks

• Higher-than-expected prize payout ratio.
• Cannibalization from Magnum’s and PMP’s 4D Jackpot.
• Hike in pool betting duty/gaming tax.

Forecasts

Unchanged.

Rating

BUY

Positives

• 4D Jackpot shows signs of stabilization vs. decline in sales previously;
• Monopoly of lotto games;
• Highest-yielding stock in the gaming sector.

Negatives

• Highly regulated industry;
• Prize payout dependable on luck factor.

Valuation

We upgrade our TP to RM4.76 (from RM4.67) as we now change from SOP to DCF valuations. Maintain BUY recommendations

Source: Hong Leong Investment Bank Research - 3 Dec 2013