Berjaya Sports Toto FY18 core earnings below forecast

In fact, the research house said, Berjaya Sports Toto Bhd

KUALA LUMPUR: Berjaya Sports Toto’s (BST) core earnings for financial year ended April 30, 2018 of RM238.5mil were below CIMB Equities Research and Bloomberg consensus expectations, at 89% and 90% of the respective forecasts.

The research house said on Tuesday the 4QFY18 dividend per share (DPS) of four sen brought FY18 DPS to 16 sen, within expectations.

CIMB Research said FY18 earnings were impacted by the weaker contribution from Philippine Gaming Management Corporation (PGMC, via 88.26%-owned Berjaya Philippines Inc) and its unit International Lottery & Totalizator Systems Inc (ITLS) which offset better performances from gaming arm Sports Toto Malaysia (STM) and car dealership HR Owen.

“Maintain Add with higher dividend discount model (DDM) based target price of RM3. FY19-21F dividend yields remain attractive at 6.4%-7.2%,” it said.

BToto reported sales of RM1.4bil (-5.2% year-on-year) and core net profit of RM35.2mil (-34.4% year-on-year). 

Excluding RM3mil forex gain and RM11mil impairment of goodwill relating to its Philippine leasing of lottery equipment business, FY18 core net profit was RM238.5mil (-2.2% year-on-year), below expectations at 89%/90% of its/Bloomberg consensus forecasts. 

Overall, FY18 revenue declined 1.2% year-on-year to RM5.6bil, but pre-tax profit rose 0.5% year-on-year to RM378mil, mainly on the back of better performances from STM and HR Owen.

STM’s profit was boosted by lower FY18 prize payout ratio of 72.9% vs. FY17’s 73% (CIMB estimates), and lower operating costs.

Nonetheless, this was offset by weaker results from PGMC, which saw its FY18 pre-tax profit drop 12.7% year-on-year due to higher operating expenses.

“Following the release of BST's full-year results, we tweak our FY19-20F EPS by -1.6% to
+0.3% and introduce our FY21F numbers. Our DDM-based TP is adjusted to RM3and our Add call is retained. 

“We forecast 2% year-on-year ticket sales growth for FY19F as we think improved consumer sentiment and habitual nature of number forecast operator (NFO) bets will continue to sustain punters’ interest. 

“We think yield seeking investors will continue to look to BST as a defensive play with attractive yields. We now estimate FY19-21F dividend yields of 6.4%-7.2%,” said CIMB Research.