Period     1Q13

Actual vs.  Expectations     The 1Q13 results came in above expectations with the core net profit of RM134.4m accounting for 34% of our FY13 full-year estimates as well as that of the market consensus. 

  The impressive set of 1Q13 results were mainly due to a favourable luck factor coupled with lower-than-expected interest charges. The estimated prize payout ratio (EPPR) was 60.9% in 1Q13 vs. our assumption of 63.0%.

Dividends    No dividend was declared as expected. 

Key highlights   The 1Q13 net profit surged 165% QoQ to RM149.4m from RM56.3m previously as the luck factor turned out to be exceptionally good in 1Q13 (EPPR: 60.9%) while the  previous 4Q12’s luck factor was badly hit (EPPR: 74.3%). In addition, interest charges in 1Q13 declined by 31% (-RM7.1m) while the 1Q13 result also included a RM15.0m one-off gain arising from the disposal of its stockbroking unit. 

On a YoY comparison, the 1Q13 net profit soared 78% from RM83.7m last year mainly due to the same reasons highlighted as above. The EPPR in 1Q12 was 66.7%.

Besides the luck factor, the NFO business reported a 14% QoQ jump in 1Q13 ticket sales to RM920.6m from RM804.0m thanks to a 12% rise in the average ticket sales of RM20.0m/draw from RM17.9m/draw previously with also one extra draw at a total of 46. YoY, NFO ticket sales improved slightly by 1% from RM913.0m, which was attributed to the one extra draw conducted (from a total of 45 previously). This was despite the average ticket sales dipping 1% from RM20.3m/draw in 1Q12.

Outlook    Given that the 1Q13 luck factor was unusually good, this may not be repeated in the future, and thus, we are expecting a weaker 2Q13. With MPHBC set to be listed in end-Jun, it will reduce our FY13-FY14 estimates by c.9%-14% but the NDPS will rise up to c.17%-37% based on its 80% dividend payout policy from our current assumption of 50%. 

Change to Forecasts       No changes to our FY13-FY14 estimates. We will issue our new estimates for the only gaming asset entity upon the listing of MPHBC. 

Rating  Maintain OUTPERFORM

MPHB is our TOP PICK in the gaming sector. 

Valuation     Our price target is maintained at RM4.31/RNAV share. 

Risks    A rise in gaming tax by the government 

Weaker than expected ticket sales and a higher than expected EPPR.

Source: Kenanga