Bullish outlook for Sports Toto

KUALA LUMPUR: Hong Leong Investment Bank (HLIB) research believes the claiming of Sports Toto's Bhd record-breaking jackpot will continue to spur interest in the game and lift the numbers forecast operator's (NFO) earnings in subsequent quarters.

The NFO recently announced core earnings of RM85.2mil for the third quarter of its 2022 financial year, which beat analyst expectations, as jackpot sales were higher than anticipated.

According to HLIB, the improved 3QFY22 results was owing to a punter winning Sports Toto's 6/58 jackpot of RM97.8mil, which generated tremendous social media buzz and press coverage.

"Although the record amount jackpot was a one-off event, nonetheless, the positive effects on SPToto’s NFO segment are here to stay.

"The jackpot should restore punters’ confidence in legal NFOs as the winning payout is guaranteed, while punters may be discouraged to bet with illegal NFOs due to high risk of payment failure of game winnings," it said.

In addition, the research firm said the robust sales in its luxury car dealership segment, HR Owen, will continue to contribute positively to the group.

In line with its improved outlook, HLIB increased its earnings forecast for FY22 by 14.8% to account for the results surprise in 3QFY22.

It maintained its "buy" call on the stock with a slightly higher target price of RM2.43.

Meanwhile, Kenanga research, which has an "outperform" recommendation on Sports Toto and revised higher its target price to RM2.33, noted that its ticket sales recovery is better than that of its peer Magnum Bhd.

The broker expects weaker 4QFY22 ticket sales following the strong 3QFY22 but believes it is on track to a full recovery in 1HFY23.

"Post-3QFY22 results, we raised FY22-FY23 estimates by 12%-10% on the back of higher ticket sales per draw assumption to RM16.3mil-RM18.7mil from RM16mil-RM17.4mil and higher HR Owen sales growth of 15%-15% from 5%-15% previously," it said.

RHB Research however is more cautious over Sports Toto's ticket sales recovery.

"We are cognisant that this quarter’s ticket sales are not representative of the underlying recovery, as it was distorted by the aforesaid historic jackpot run. Taking a cue from Magnum’s 1QFY22 results, we believe the underlying ticket sales recovery will take longer than expected, as punters may be financially worse off and/or have increasingly turned to illegal NFOs," it said.

However, the broker expects demand for luxury cars to continue to drive HR Owen's earnings as the automotive industry continues to face supply chain issues.

While RHB kept a "buy" call on Sports Toto it lowered its target price to RM2.20 to account for the current market sentiment and increased risk-free rate in its discounted cashflow calculation.

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Sports Toto , gaming , NFO , Kenanga , RHB , HLIB


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