The toto betting operations operated by Sports Toto Malaysia Sdn Bhd, the principal subsidiary of Berjaya Sports Toto Bhd, reported lower revenue, as revenue is currently presented net of GST on gaming supply compared to the previous year
KUALA LUMPUR: CIMB Equities Research is retaining its Hold call for Berjaya Sports Toto (BToto) with a lower target price of RM2.90 compared with its earlier RM3.29 target.
It said on Tuesday BToto’s 4QFY16 revenue and net profit of RM152.4mil (+12.2% on-quarter) and RM104.7mil (+79% on-quarter) brought FY16 net profit to RM306mil.
“FY16 net profit was 7% above our full-year estimate. This was on account of strong 4Q seasonality due to Chinese New Year betting and lower prize payout ratio of 63% in 4Q (67% in 3Q).
“On a year-on-year basis net of Goods and Services Tax, numbers forecast operations (NFO) sales fell 1.8%. HR Owen’s FY16 pretax profit of RM10.4mil disappointed versus RM21.6mil in FY15 and our FY16 estimate of RM30mil,” it said.
CIMB Research said for FY16, BToto paid out 84% of its full-year net profit, well above its stated minimum dividend payout policy of 75%. It retained its FY17-19F payout ratio estimate of 85%.
The research house cut FY17-18F EPS by 9% for lower NFO sales and profit contribution from HR Owen, and introduce FY19F EPS. It previously modeled NFO sales growth of 2% in FY17 and 1% in FY18.
It now estimated NFO sales contraction of 4% in FY17F and 2% in FY18-19F. It also lower HR Owen’s profit contribution from RM30mil to RM10mil in FY17-19F.
In May-June 2016, Berjaya Land
sold 14.2 million BToto shares at average prices of RM2.86-RM2.95. This represented a 1.1% stake in BToto and raised RM40mil cash, likely to help Berjaya Land repay its medium-term-notes (MTN) of RM55mil due in Jun 16.
Berjaya Land’s stake in BToto now stands at 40.1%. Berjaya Land’s next MTN repayments are RM50mil in October 2016 and RM150mil in June 2017.
“We believe ongoing sale of BToto shares by Berjaya Land is creating an overhang on BST’s share price and sends a negative signal to minority shareholders.
“We maintain our Hold rating on BToto. In spite of its very attractive FY17-19F dividend yield of 7.6%-7.7%, concerns about the ongoing sale of BToto shares by its holding company will create overhang and cap share price outperformance in the short-to-medium term.
“Risks to the downside are further selldown in BToto shares by Berjaya Land. Upside risks include higher payout ratio and improved consumer sentiment, which would improve NFO sales,” it said.
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