HLIB Research upgrades BToto to 'buy', raises target price by 13% to RM2.40 on expected 4Q earnings recovery

HLIB Research upgrades BToto to 'buy', raises target price by 13% to RM2.40 on expected 4Q earnings recovery
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KUALA LUMPUR (Feb 24): Hong Leong Investment Bank (HLIB) Research has upgraded Berjaya Sports Toto Bhd (BToto) to "buy" from "hold", and upgraded its target price by 13% to RM2.40 from RM2.13, as it expects earnings recovery from the company in the fourth quarter ending June 30, 2021 (4QFY21).

Its analyst Low Jin Wu said in a note today, BToto reported 2QFY21 core net profit of RM70.4 million — down 6.2% quarter-on-quarter but up 5.2% year-on-year (y-o-y) — bringing 1HFY21’s sum to RM145.3 million (+20.2% y-o-y), constituting 68% of his and consensus’ full-year forecasts.

“We deem this result to be in line with expectations as we expect 3QFY21 results to be significantly weaker due to the closure of its outlets when Movement Control Order 2.0 (MCO 2.0) was re-implemented,” he said.

Low also said BToto outlets have since been re-opened on Feb 16, and he expects the group’s operations to record a strong recovery in 4QFY21.

“We expect higher gaming revenue from 4QFY21 onwards due to the current timeline of vaccine rollouts,” he said.

He noted 3QFY21 performance should be its weakest for FY21 due to the five-week closure of its outlets as a result of MCO 2.0.

Low believed that its customers would have a higher willingness to go out to purchase draws when vaccination rates are higher and Covid-19 cases are lower.

Low also expects the clampdown on illegal number forecast operators to be more rampant after the MCO restrictions are lifted, which could bode well for BToto’s sales volume.

“We also believe that 3QFY21 would be the trough for BToto in FY21 and we expect its earnings to recover sequentially from 4QFY21 onwards heading into FY22 as the Malaysian economy continues to recover from the Covid-19 pandemic.

“We believe that the stock is attractive at this juncture with a strong projected dividend yield of 5.2%,” he said.

At the time of writing, BToto’s shares rose three sen or 1.43% to RM2.13, valuing the group at RM2.84 billion.

Joyce Goh