This article first appeared in The Edge Financial Daily on January 8, 2020

Berjaya Sports Toto Bhd
(Jan 7, RM2.56)
Maintain buy with an unchanged target price (TP) of RM3.10: Our “buy” recommendation on Berjaya Sports Toto Bhd (BToto) is maintained with an unchanged TP of RM3.10, based on the dividend discount model (DDM). We are positive the group will still benefit from the authorities’ more stringent enforcement of curbing illegal numbers forecasting operators (NFOs).

Besides that, its completely new game variant 4D Zodiac launched in June, without replacing the existing game, signifies the authorities’ increased willingness to further liberalise the NFO sector, which could be another catalyst for 2020. We believe the stock’s attractive dividend yield of more than 6% will still support its share price.

Our TP is higher than consensus’ as we adopted a more aggressive valuation basis. We believe the market underappreciated the authorities’ intensified efforts to curb illegal NFOs. Further, BToto’s attractive dividend yields of above 6% will still support its share price.

Potential catalysts are higher-than-expected ticket sales due to the authorities’ intensified efforts to curb illegal NFOs, the successful launch of new game variants and a stronger-than-expected recovery in consumer sentiments.

Our “buy” recommendation for the group is maintained with an unchanged DDM-based TP of RM3.10. BToto is our top pick for exposure to the gaming sector. Key risks to our view are lower-than-expected ticket sales on intensifying industry competition and weaker consumer sentiments. — AllianceDBS Research, Jan 7