Maybank IB Research retains Buy on Berjaya Sports Toto


  • Analyst Reports
  • Tuesday, 20 Aug 2019

Maybank IB Research said for the two months May to June, BToto posted a headline net loss of RM41.4mil due to impairment of goodwill and assets on the disposal of PGMC.

KUALA LUMPUR: Berjaya Sports Toto (BToto) negatively surprised with a headline net loss for May-June 2019 due to impairments at Philippine Gaming Management Corporation (PGMC), Maybank Investment Bank Research said.

However, the research house said on Tuesday the core net profit for the 14 months ended June 30, 2019 was within its expectation.

“While PGMC’s outlook is uncertain, we expect the downside risk to group earnings to be limited to 6%-8%. More crucially, we remain positive on Sports Toto Malaysia thanks to active enforcement against illegal numbers forecast operators (NFOs.)

“Our FY20/FY21/FY22 EPS estimates are tweaked +1%/+2%/+2% after minor adjustments. Buy call and RM3.05 sum-of-parts based TP maintained, ” it said.

Maybank IB Research said for the two months May to June, BToto posted a headline net loss of RM41.4mil due to impairment of goodwill and assets on the disposal of PGMC.

Recall that 88%-owned Berjaya Philippines cut its shareholding in PGMC to 40% from 100% (link) in Jul 2019 as PGMC bid for the Philippine Charity Sweepstake Office (PCSO) National Online Lottery System (NOLS). Going forward, PGMC will be recognised as an associate.

Due to this interim period headline net loss, BToto did not declare a dividend for this interim period, leading to total 16 sen for 14MFY6/19.

Adjusting for the aforementioned exceptional item however, 14MFY6/19 core net profit of RM315.7mil was within Maybank IB Research’s expectation at 100% of full period estimate.

Sports Toto Malaysia (STM) contributed 86% to group EBIT in 14MFY6/19, fuelled by a recovery in gross NFO sales/draw thanks to more active enforcement against illegal NFOs.

“On the PCSO NOLS bid, PGMC was recently informed by PCSO that it failed the qualifications set. Curiously, this was after PCSO declared PGMC the only eligible bidder after disqualifying the only other bidder, the Pacific Online Systems Corp-Scientific Games JV on July 9, 2019.

“While PGMC has filed a protest which is pending resolution, we are not overly concerned as we expect it to contribute only 6-8% to BToto’s earnings going forward, ” it said.


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