BToto reported 2M5QFY19 core PATMI of RM32.8m, bringing 14MFY19 sum to RM290.6m which is broadly within our expectations. Note that the 14MFY19 core PATMI sum has been arrived after excluding investment related income and expenses amounting RM55.5m. No QoQ/YoY/YTD meaningful comparisons are available due to the changes in financial year-end. PGMC was informed by the PCSO during the opening of the submitted bids that only PGMC was declared eligible subject to evaluation. Subsequently, PGMC did not manage fulfil all the requirements and thus resulting in PCSO wanting to carry out a rebidding process. Given the absence of a concrete outlook, we continue to take a very conservative stance by excluding the contribution from the lottery leasing operation post Aug 2019. We maintain our forecast and HOLD call with an unchanged TP of RM2.46.

Broadly within expectations. BToto reported 2M5QFY19 core PATMI of RM32.8m, bringing 14MFY19 sum to RM290.6m. We deem this broadly within expectations as it formed 95.1% of our forecast. Note that the 14MFY19 core PATMI sum has been arrived after excluding investment related income and expenses (i.e. impairment of goodwill and assets of the lottery equipment business in Philippines) amounting RM55.5m. There are no consensus numbers available as BToto had recently changed its FYE from Apr to June (14MFYE).

Dividend. None declared (14MFY19: 16.0 sen, 12MFY18: 16.0 sen)

QoQ/YoY/YTD. Meaningful comparisons are not available due to the changes in financial year-end.

Philippine Gaming Management Corporation (PGMC)’s bid. On 9 Jul 2019, PGMC was informed by the Philippine Charity Sweepstakes Office (PCSO) during the opening of the submitted bids that only PGMC was declared eligible subject to evaluation. Subsequently, PGMC did not manage to fulfil all the requirements (management has clarified that the areas failed were non-critical) and thus resulting in PCSO wanting to carry out a rebidding process. As such, PGMC has filed a protest which is still pending resolution.

Resolution unlikely in the near-term. We have gathered that PCSO is targeting to commence the rebidding process by end-2019. However, we believe the proposed timeline is unlikely given that PCSO would likely have to address PGMC’s protest before considering a rebidding. Given the absence of a concrete outlook, we continue to take a very conservative stance by excluding the contribution from the lottery leasing operation post Aug 2019.

Forecast. Unchanged.

Maintain HOLD, with unchanged TP RM2.46. Our valuation is based on DCF valuation with WACC of 8.1% and TG of 1.5%. We believe BToto remains unexciting with the lack of fresh catalyst coupled with challenging operating environment amid rampant illegal operators. Nonetheless, dividend yield of 5.8% is the saving grace.

Source: Hong Leong Investment Bank Research - 20 Aug 2019