Berjaya Sports Toto: Maintain Buy - Steadily Regaining Market Share

By Maybank IB Research
19 June 2012

Earnings in line.  BST’s results were very much within expectations.
However, FY4/12 net DPS of 27sen was 29% or 4sen above our
expectations. Operations wise, it regained market share thanks to 4D
Toto Jackpot. All else being equal, FY4/13 earnings should be higher
YoY due to full year effect of 4D Toto Jackpot (FY4/12: 10½ months).
Maintain BUY call and DCF-based TP of MYR5.00.
Dividends outperformed.  4QFY4/12 net profit of MYR91.2m (-12%
YoY, -19% QoQ) brought FY4/12 net profit to MYR401.7m (+15% YoY),
making up 99% of our full-year estimate. FY4/12 revenue of MYR3.6b
(+5% YoY) was also within expectations at 101% of our estimate.
4QFY4/12 net DPS of 5sen brought FY4/12 net DPS to 27sen (+29%
YoY), 4sen above our expectations. This reflected a net DPR of 90%
(assumption: 75%).
Boosted by 4D Toto Jackpot. FY4/12 net profit was 15% higher YoY
as Sports Toto Malaysia’s (STM) revenue/draw grew 5% YoY, driven by
4D Toto Jackpot.  We estimate that its prize payout ratio eased 1ppt
YoY to 63%. 4QFY4/12 net profit was 19% lower QoQ due to
seasonally slower post-Chinese New Year sales, two less draws QoQ
and an estimated 3ppt QoQ increase in its prize payout ratio, to 65%.
4QFY4/12 stronger than it seems. 4QFY4/12 net profit was 12%
lower YoY; we estimate that prize payout ratio rose 3ppts YoY to 65%.
Encouragingly, 4QFY4/12 revenue was flattish YoY despite Chinese
New Year falling in 3QFY4/12 this year vs. 4Q in FY4/11, and there
being one less draw YoY. This was obviously due to its lotto games led
by 4D Toto Jackpot regaining market share at Magnum’s and Pan
Malaysia Pool’s expense.
Maintain BUY call. We leave our earnings estimates and DCF-based
TP of MYR5.00 unchanged, although we roll forward our valuation from
end-FY4/12 to end-FY4/13. It is obvious that 4D Toto Jackpot has
helped BST regain market share and its earnings recover. A full year
effect will be felt in FY4/13 (FY4/12: 10½ months). Meanwhile,
attractive net dividend yields of 5.7-6% (based on 75% net DPR) will
help limit downside risk.


Share price: MYR4.23
Target price: MYR5.00

[Source]


BJCORP Corporate Chart- BJCORP owns 51.05% of Berjaya Sports Toto Berhad(BJTOTO)

BJToto - MARKETPERFORM - Eyeing a stake in Philippine NFO?

By Kenanga Research
16 Apr 2012

It was reported over the weekendthat BToto is eyeing a stake in a Philippine NFO. We see this potentialoffshore expansion to broaden its earnings base as a positive move, if theacquisition materialises, given its current less exciting domestic growth. We have estimated the top line to growonly 4% annually over the next two years as the local NFO market matured. Atthis juncture, we are unable to confirm the news and quantify the exactfinancial impact to BToto given the limited information obtained. In the mean time, we continue to maintain our MARKET PERFORM call on the stock with anunchanged DCF-derived TP of RM4.52/share. 

Eyeing stake in Philippine NFO. It was reported in The Edge Weekly that Berjaya Sports Toto Bhd (BToto)is looking to expand its operations in the Philippines by potentially acquiringa stake in the Philippines Charity Sweepstakes Office (PCSO).  However, we are unable to confirm the news atthis juncture. We are positive on the news (if it materialises) as an offshoreexpansion is the way to broaden the company's earnings base given the limitedgrowth prospects locally. However, previous failed cases of overseas venture byits local peers, namely Magnum Corp (in Bali) and Tanjong plc (in Moscow), indicate that local NFOs'  overseas venture may not be easy. 

PCSO is a state-owned charity organisation.  PCSO is the principal government agency inPhilippines set up with the aim of raising and providing funds for health programs,medical assistance and services, and charities of national character.  The main products of PCSO are sweepstakes andthe lottery games. It currently has 3,232 terminals across 2,600 outlets inLuzon island. PCSO is actually not new to BToto as its subsidiary, Berjaya PhilippinesInc (BPI) supplies and maintains a computerised online lottery system andprovides software support to PCSO.

30% fund channel for charity. In accordance with the company's Charter, PCSO specifically allocatesits  net receipts or revenues in thefollowing manner i.e. 55% to a Prize Fund, 30% to a Charity Fund and 15% to anOperating Fund. Each allocation has its own specific purpose and usage, andhence any diversion or inter-fund transfers are illegal and in violation of thePCSO Charter. Given so, in our opinion, PCSO needs to amend its Charter if it wereto privatise from a charity organisation to a profit-oriented company. We are however unable to ascertain the earningsand market size of PCSO from its currently publicly available information (suchas from its website -  www.pcso.gov.ph). Consequently,we are not able to estimate the potential financial impact on BToto yet at thisjuncture (if the deal materialises).  

MARKET PERFORM rating maintained. We reckon that BToto's localmarket is fairly matured with limited growth prospects. Thus, an overseasexpansion is the way to broaden its earnings base. Although we have a MARKETPERFORM call on BToto, we reckon that income seeking investors may still likethe stock for its sustainable and attractive 7%-8% gross dividend yield. Ourprice target of RM4.52/share is based on DCF valuation where we assumed a WACCof 7.4%. 

Price- RM4.38

Target price- RM4.52


[Source]