BToto still a compelling dividend play

TA Research said the impact of the third movement control order (MCO 3.0) on NFO operations would likely be manageable, as outlets are operational with stricter standard operating procedure.

PETALING JAYA: Berjaya Sports Toto Bhd (BToto) remains a favoured company among analysts despite its lacklustre performance for the third quarter ended March 31,2021 (Q3’21).

This is mainly attributable to the compelling dividend yield of the number forecast operator (NFO) as well as the defensive nature of the company’s business.

Last week, BToto announced a third interim dividend of 1.5 sen per share, bringing the total dividend declared year to date to 8 sen per share.

TA Research said the impact of the third movement control order (MCO 3.0) on NFO operations would likely be manageable, as outlets are operational with stricter standard operating procedure.

“With regards to the gaming tax, we do not expect any hike in Budget 2022 since the industry has not fully recovered from the pandemic, ” the brokerage said. It maintained “buy” on BToto with a target price of RM2.40.

“We continue to like BToto for its defensive earnings quality and compelling dividend yield, ” TA Research said, projecting the company’s dividend yield at 8% for the financial year ending June 30,2021 (FY21) and 8.5% for FY22.

RHB Research said BToto’s business remained resilient despite the short-term challenges.

“MCO 3.0 is expected to slow down the path to a full ticket sales recovery, as punters may exercise caution and avoid crowded places. While the rising number of COVID-19 cases may lead to temporary outlet closures, we believe these are just short-term hurdles, especially with the ongoing rollout of vaccines, ” the brokerage said.

“We expect ticket sales to recover strongly under a normalised business environment. We also expect the NFO business to remain resilient, as demand is fairly inelastic, ” it added.

RHB Research maintained “buy” on BToto with a target price of RM2.34.

“We continue to like the stock for its attractive FY22-FY23 dividend yield of 8%, backed by the resilient Toto business, ” it explained.

“Further upside could come from ongoing efforts to clamp down on illegal gambling. While there is underlying risk of non-renewal of its Philippines Gaming Management Corp associate’s lottery equipment lease agreement, the impact to our forecast is minimal at less than 3%, ” it added.

BToto last week said its net profit fell 62% year-on-year for Q3’21 to RM18.68mil on revenue of RM1.12bil due to Covid-19 restrictions.

Sports Toto Malaysia Sdn Bhd, the group’s principal subsidiary, registered a decrease in revenue and pre-tax profit of 36.1% and 65.1%, respectively.

The lower revenue registered in the current quarter was mainly due to the implementation of the MCO 2.0 in all states in Malaysia except for Sarawak from Jan 13 to Feb 18.

“Even though Sports Toto outlets resumed operations on Feb 19, sales recovery was slower than expected due to weaker consumer sentiments and consumers being cautious in patronising sales outlets during the Conditional MCO period.

The drop in pre-tax profit was in line with the lower sales coupled with higher prize payout during the current quarter.

The group said Sports Toto’s operations is expected to be affected by the reimplementation of the nationwide MCO effective May 12.

As the number of new Covid-19 cases remained high and death toll continued to rise, the outlook remained challenging for the group.

“It is extremely challenging to ascertain the full extent and duration of the impact to the Group’s operations and financial performance, ” it said.

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