As financial year-end was changed from April to June in the previous quarter, meaningful comparisons are not available. BToto reported 1QFY20 core PATMI of RM58.4m, coming in slightly below expectations which was largely attributed to higher than expected depreciation costs. Our core PATMI sum has been arrived from excluding the gain on disposal of an investment property. We believe PCSO’s target to commence the rebidding process by end-2019 is unlikely to be achieved given that PCSO would likely have to address PGMC’s protest before considering a rebidding. We lower our FY19/20 forecasts by - 4.5%/-3.3% respectively and introduce FY21 core earnings of RM265.1m. Maintain HOLD with a slightly higher TP of RM2.50 despite the earnings cut as we rollover our valuation base to FY20.

Slightly below expectations. BToto reported 1QFY20 core PATMI of RM58.4m, forming 22.8% and 22.4% of ours and consensus forecasts, respectively. The slight results shortfall was largely attributed to higher than expected depreciation costs. Our core PATMI sum has been arrived from excluding the gain on disposal of an investment property (RM8.6m).

Dividend. Declared 4.0sen of dividend, going ex on 12 Dec.

QoQ/YoY/YTD. As financial year-end was changed from Apr to June in the previous quarter, meaningful comparisons are not available. Note that due to the FYE change, 5Q19 only consisted of 2 months and 1Q19 were not the same calendar months (i.e. 1Q19 was May-July and 1Q20 is from July-Sept).

Philippine Gaming Management Corporation (PGMC)’s bid. Recall that 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. We believe PCSO’s target to commence the rebidding process by end-2019 is unlikely to be achieved given that PCSO would likely have to address PGMC’s protest before considering a rebidding.

Forecast. We lower our FY19/20 forecasts by -4.5%/-3.3% respectively and introduce FY21 core earnings of RM265.1m.

Maintain HOLD, with a slightly higher TP of RM2.50 (from RM2.46) despite the earnings cut as we rollover our valuation base to FY20. 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 6.3% is the saving grace

Source: Hong Leong Investment Bank Research - 20 Nov 2019