News    BJTOTO was one of six counters that hit limit-down in a combined trade of RM43.1m in the short window time period during the pre-close session last Friday. BJTOTO’s share price tumbled RM1.01 or 24% to close at RM3.20. 

Comments    We understand that this was due to programme selling for the FTSE rebalancing. 

Although we are negative on its STM-Trust listing on the SGX, last Friday’s unexpected plunge in the share price now presents a buying opportunity.

At RM3.20, the stock is now trading at attractive valuations of a forward PER of 12.1x and 7.4% net yield. The last time the stock traded at such a low earnings multiplier was in Sept 2004. In the past five years, BJTOTO traded at an average forward PER of 15.5x.

The last time we saw the share price tumbled sharply is in Jun 2004 where BJTOTO absorbed RM152m MI losses, which raised corporate governance issue. Back then, the share price plunged 56 sen or 13% in two trading days on 21 and 22 Jun 2004. 

Outlook   Its forward sales/profits ratio remained resilient, but the company’s net earnings and dividends are set to decline post the listing of STM-Trust as BJTOTO will only own c.80% of the Business Trust.

According to StarBizWeek, a representative from the Bursa Malaysia later confirmed that the trades were valid and genuine.

Forecast   No changes to our estimates. 

Rating   Upgrade to OUTPERFORM

There is no change in our negative view on its STMTrust listing. The upgrade in our rating is merely on valuation grounds after last Friday’s program selldown.

However, as this is a “technical” sell-down, investor may not be able to buy at this level, our buying ceiling price is RM3.62.

Valuation    Our price target is maintained at RM4.02/share at a 10% discount to its DCF-derived valuation. Post the RM0.49/share cash distribution, the target price will be adjusted accordingly to RM3.58/share.   

Risks   The risks to our estimates are stronger than expected ticket sales and a lower than expected EPPR.

Source: Kenanga