KUALA LUMPUR: Berjaya Sports Toto Bhd
could be facing a more challenging second half of its financial year due to a reduction in the number of special draw days effective 2019.
"We are expecting a contraction in earnings for 2H19, as there would be fewer draw days due to the reduction in the overall number of special days starting in 2019," said Affin HWang research.
The research house retained its earnings per share forecast and target price of RM2 while maintaining its "hold" recommendation due to limited upside from current levels.
The numbers forecast operator's net profit of RM147.2mil in the first half of FY2019 came in slightly ahead of Affin HWang's full-year forecast and was in line with consensus estimates.
According to the research house Berjaya Sport's Toto's profit before tax in 1HFY19 was flat year-on-year despite revenue dropping 0.6%.
"The flattish earnings were supported by the strong performance in 1QFY19, as BST benefited from the tax holiday period and lower prize money payout during the quarter.
"Without the benefit of both, PBT contracted significantly in 2QFY19 (-13.4% yoy; -21.2% qoq)."
Affin Hwang said the stronger-than-expected revenue from Philippines leasing was a positive surprise as the management was able to lower cost to improve profitability.
"However, we believe that the revenue growth is not sustainable as the fees on the leasing contract to supply lottery equipment in Luzon, is likely to be renewed at a lower rate moving forward."
In the UK motor division, earnings momentum was slow in Q2 due to the delay in new car delivery due to the new changes to the emission testing of all new vehicles.
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