Magnum’s 9MFY13 core earnings of MYR260.0m were within consensus but above  our expectations,  at 83.4% of our full-year estimate,  boosted by a lower prize payout ratio. The company declared a third interim DPS of 5.0 sen,  bringing its YTD  DPS  to 15.0 sen.  Maintain NEUTRAL, with our  SOP-based  FV  tweaked  marginally  higher  to  MYR3.41  (from MYR3.40) following our FY13F earnings revision.

• Above expectations.  Magnum’s 9MFY13 revenue dipped 4.2% y-o-y to MYR2.25bn  as  bets  per  draw  declined  on  relatively  lower  average jackpot prize pools in  9MFY13. Nevertheless, EBITDA improved 6.7% yo-y to MYR408.5m, led by a lower prize payout ratio, which boosted the group’s profit. We estimate that its  9MFY13 gross payout ratio improved to 65.5% from 69.4% in 9MFY12. Excluding  its  discontinued operations following  the  disposal  of  MPHB  Capital  (MPHB  MK,  NR),  Magnum’s 9MFY13 core earnings ticked up 7.7% y-o-y to MYR260.0m, beating our estimates and comprising 83.4% of our full-year forecast due to a betterthan-expected  prize  payout  ratio.  The  3QFY13  core  earnings  of MYR64.8m were 19.8% higher y-o-y due an improved prize payout ratio, but were down 9.3% q-o-q due to higher opex. 
• Annual dividend yield of 4.7-4.8%.  Management also declared  its  third interim DPS of 5.0 sen, bringing its YTD DPS to 15.0 sen,  representing close to  a  100% payout ratio.  Moving forward, we peg  an 80%  payout ratio  (being  the minimum level committed by management)  for FY14FFY15F, which will translate into an annual dividend yield of 4.7-4.8%.
• Maintain  NEUTRAL.  In  view  of  the  better  than  expected  results,  we tweak  our FY13F prize payout ratio  a tick  lower by 100bps.  This raises our FY13F net profit estimate by 7.9% to MYR337.8m,  while leaving  our FY14F/15F  numbers  largely  unchanged.  All  in,  we  maintain  our NEUTRAL stance,  with our SOP-based FV tweaked marginally  higher to MYR3.41. Based on  the stock’s  last closing of MYR3.24,  it  is currently trading  on  par  with  its  numbers  forecast  operator  (NFO)  peers’  17.0x FY14F P/E. Nonetheless, we believe the stock will appeal to risk-averse investors given its relatively appealing di vidend against the backdrop of the current market volatility.

Financial Exhibits

SWOT Analysis

•   A pure gaming play with the dividend policy of a minimum 80% payout

Company Profile
Magnum is one of the largest NFO operators in Malaysia.

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Source: RHB