Magnum’s 2QFY13 core earnings of MYR71.4m came in within our expectation  of  MYR60-70m,  as  highlighted  in  our  results  preview previously. The company also declared its first interim DPS of 5.0 sen. All  in,  we  make  no  changes  to  our  core  assumptions.  Maintain NEUTRAL, with our SOP-based FV unchanged at MYR3.40.

- Decent  results.  Magnum’s  1H13  revenue  edged  down  3.2%  y-o-y  to MYR1.55bn, as  bets  per  draw  declined on  relatively  lower  jackpot prize pools  in  1H13.  Nevertheless,  EBITDA  improved  5.1%  y-o-y  to MYR263.3m,  led  by  a  lower  prize  payout  ratio,  which  boosted  the group’s  profitability.  We  estimate  that  its  1H13  gross  payout  ratio improved  to  65.8%  from  69.5%  in  1H12.  Excluding  the  one-off MYR45.2m  loss  from  the  disposal  of  MPHB  Capital  (MPHB  MK,  NR), Magnum’s 1H13  core  earnings  inched  up  4.2%  y-o-y  to  MYR195.3m, making up 62.4% of our full-year forecast. Nonetheless, we deem this in line  with  our  expectations, as we expect Magnum’s 2H13  earnings  to trend  lower  following  the  disposal  of  its  insurance  and  financial businesses  under  MPHB  Capital.  Quarterly  comparisons  are  not meaningful,  given that 2Q13 marked Magnum’s first quarter  of  being  a pure  gaming  play  following  the  disposal  of  MPHB  Capital,  and  restated retrospective quarterly numbers are not available.  

- Dividend  yield  of  4.5-4.7%  per  annum.  Management  also  took  the opportunity to declare its first interim DPS of 5.0 sen. Pegging a payout ratio  of  80%  over  the  next  three  years,  we  are  forecasting  for  DPS  of 14.9-15.5 sen for FY13F-15F. This translates into a dividend yield of 4.5-4.7% per annum.  

- Retain  forecasts.  With  the  results  largely  in  line,  we  make  no  major changes to our earnings estimates.

- Maintain NEUTRAL. All in, we are maintaining our NEUTRAL stance on the  stock.  Based  on  its  last  closing  of  MYR3.33,  the  stock  is  currently trading  on  par  with  its  number  forecast  operator  (NFO)  peers  at  17.4x FY14F P/E. Nonetheless, we believe the stock will appeal to risk-averse investors, given its relatively appealing dividend return amidst the current market volatility.  

Source: RHB