As the financial year-end was changed from April to June in FY19, meaningful comparisons are not available for YoY/YTD. BToto reported 1HFY20 core PATMI to RM120.3m, forming 49.2% and 46.6% of ours and consensus forecasts, respectively. Core PATMI improved +6.1% QoQ largely stemming from a larger proportion of Gaming contribution which delivers better margins. With regards to PGMC’s protest, the court had ruled in favour of PCSO and as such, the rebidding process will continue but the timeline is still uncertain at this juncture. We maintain our forecast and HOLD call with a slightly higher TP of RM2.59 as we rollover our valuation base to FY21.

Within expectations. BToto reported 2QFY20 core PATMI of RM61.9m (+6.1% QoQ), bringing 1HFY20 core PATMI to RM120.3m. This was within our expectations but below consensus as it formed 49.2% and 46.6% of ours and consensus forecasts, respectively. 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 10 Mar.

QoQ. Revenue remained relatively flat at RM1.4bn (-2.0%) as the drop in revenue from the Motor Vehicle (H.R. Owen) and Others segment was offset by the improvements in the Gaming segment. Core earnings improved +6.1% to RM61.9m despite the flattish revenue largely stemming from a larger proportion of Gaming contribution which delivers better margins.

YoY/YTD. As financial year-end was changed from April to June in FY19, meaningful comparisons are not available. Note that due to the FYE change, 2QFY19 and 1HFY19 did not consist of the same months as 2QFY20 and 1HFY20 (i.e. 2QFY19 was Aug-Oct and 2QFY20 was Oct-Dec)

Philippine Gaming Management Corporation (PGMC)’s bid. To recap, 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. Subsequently, PGMC filed for protest but to no avail, the court had ruled in favour of PCSO. As such, the rebidding process will continue but the timeline is still uncertain at this juncture.

Forecast. Unchanged.

Maintain HOLD, with a slightly higher TP of RM2.59 (from RM2.50) as we rollover our valuation base to FY21. Our valuation is based on DCF valuation with WACC of 8.1% and TG of 1.5%. We feel that BToto remains unexciting with the lack of fresh catalyst coupled with challenging operating environment amid rampant illegal operators. Nonetheless, dividend yield of 6.1% is the saving grace.

Source: Hong Leong Investment Bank Research - 19 Feb 2020