KUALA LUMPUR: CIMB Equities Research has reduced its target price of Berjaya Sports Toto (BToto) from RM3.09 to RM2.62 but retained its Add call due to its stable operational cashflow and attractive 6.8% dividend yield.
The research house had on Tuesday cut its FY19-21F EPS by 19-21% to reflect weaker-than-expected gaming revenue and expected flat revenue and profit from H.R. Owen (HRO) in FY20/21F.
“We had earlier expected a 3-4% number forecast operator (NFO) revenue growth in FY19F due to a clampdown on illegal NFO operators by the government from 2HCY18 onwards but BToto’s NFO revenue has so far been uninspiring,” it said.
CIMB Research is now forecasting just a 1% NFO revenue growth for FY20/21F and a higher 68.0% prize payout ratio (vs. 67.7% previously).
“We also forecast flat revenue and profit for HRO in FY20/21F due to expected weak consumer sentiment ahead of Brexit. Our dividend discount model-based TP drops from RM3.09 to RM2.62 due to a lower DPS outlook,” it said.
It said BToto’s 9MFY19 revenue was down 1.1% on-year at RM4.214bil mainly due to weak gaming revenue, which declined 1.3% on-year to RM2.401bil.
The 9MFY19 domestic NFO revenue fell 0.6% on-year at RM2.315bil while Philippines Gaming Management Corporation’s (PGMC) 9MFY19 revenue was down 17.3% on-year at RM85.7mil.
NFO profit before tax (PBT) declined 2% on-year at RM282mil due to higher prize payout ratio.
“We estimate NFO prize payout ratio in 9MFY19 was 68.0%, compared to 67.7% in 9MFY18,” it said.
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