Kenanga Research has reiterated its
KUALA LUMPUR: CIMB Equities Research is keeping its earnings forecast, Add call and dividend discount model based target price of RM2.85 for Berjaya Sports Toto (BToto).
“In spite of the murky outlook for the overall numbers forecast operators (NFO) sector amid an intensive competitive environment, we think investors seeking for a defensive yield play should continue to find BToto attractive. We estimate FY18-20F dividend yields of 6.7%-7%," it said.
For the second quarter ended Oct 31, 2017 (2QFY4/18), BToto posted RM1.4bil revenue ( down 4.9% on-year) and RM61.7mil core net profit (-0.7% on-year).
This brought 1HFY18 core net profit to RM136m (+12.5% on-year), broadly in line with our and Bloomberg consensus expectations at 52% and 48% of the respective full-year forecast.
BToto declared 2QFY18 dividend per share (DPS) of four sen (vs. 2QFY17 DPS: four sen), bringing 1HFY18 DPS to eight sen (vs. 1HFY17 DPS: eight sen).
“This is in line with our FY18 DPS estimate of 14.8 sen (based on 80% payout ratio assumption),” it said.
CIMB Research said Overall, BToto’s on-year revenue decline in 2QFY18 was mainly due to weaker contributions from its luxury car distributor unit H.R. Owen and its International Lottery Totalizator Systems Inc (ITLS).
These factors which offset the positive growth from both Sports Toto Malaysia (STM) and Philippine Gaming Management Corporation.
Nonetheless, 2Q pre-tax profit notched up 0.7% yoy, mainly helped by lower prize payouts and opex at Sports Toto Malaysia (STM), as well as higher lease income at PGMC.
“Based on our understanding, the presently outdating Common Gaming Houses Act 1953 (CGHA) 1953 has not taken into account the evolution of gaming.
“Gaming has shifted to more advanced and unconventional channels, making it challenging for law enforcers to clamp down on online casinos and gambling operators,” it said.
Thus, any impending alterations to the CGHA would require tackling online and offline gambling-related crime activities and dishing up more severe sentences for illegal syndicates.
Should the explicit banning of illegal online gaming materialises in an amendment of gaming bill in the near future, it could serve as a re-rating catalyst for the overall NGO industry and potentially eliminate unregulated online syndicates.
CIMB Research said hence, this could bring back market share for the legal betting operators such as BST and level out the operating environment.
