Berjaya Sports Toto Bhd
(March 19, RM3.38)
Maintain hold with an unchanged target price of RM3.36. Stripping off an exceptional item attributed to the refund of RM18 million in stamp duty from the aborted listing of Sports Toto Malaysia Trust on the Singapore Stock Exchange, the group reported third quarter of financial year 2015 (3QFY15) core net profit of RM86.6 million, up 4% year-on-year (y-o-y) but down 13% quarter-on-quarter (q-o-q).
Top line growth was mainly driven by revenue contribution from HR Owen plc, its franchised motor vehicle dealership.
Operations at its core gaming business remained challenging. In fact, Berjaya Sports Toto’s revenue for the nine months of FY15 (9MFY15) fell 4.3% y-o-y due to lower ticket sales as a result of increased competition from illegal operators and weak consumer spending. Core earnings for 9MFY15 of RM265 million accounted for 74% of our and consensus full-year estimates.
The group declared a third interim dividend per share (DPS) of five sen. This brings 9MFY15 DPS to 16.5 sen, implying an 82% payout ratio, which is above management’s guidance and our estimate of 75%.
The outlook remains challenging and earnings could be dragged by the goods and services tax (GST). The group also registered lower gaming revenue in 9MFY15, reflecting the ongoing competition within the numbers forecast operations industry and weaker consumer spending.
The implementation of the GST in April could weaken consumer sentiment further and is an earnings risk. — AllianceDBS Research, March 19
This article first appeared in The Edge Financial Daily, on March 20, 2015.