BJTOTO (1562) - Berjaya Sports Toto - Subpar dividends
Target RM3.15 (Stock Rating: HOLD)
Berjaya Sports Toto’s (BST) 9MFY4/15 core net profit of RM265m was, at 72% of our full-year forecast, within our expectations as we expect a seasonally stronger 4Q. 3Q DPS of 5 sen brought 9M15 DPS to 16.5 sen, below our full-year forecast of 24.5 sen. We maintain our EPS forecasts but lower our DPS forecasts for a payout ratio of 85% instead of 90%. Our DDM-based target price is lowered correspondingly. We maintain our Hold rating as BST’s share price will continue to be supported by its sub-7% dividend yield, internal share buybacks and external buying by major shareholder, Tan Sri Vincent Tan. We recommend Genting Malaysia for gaming exposure.
Declining NFO sales
3QFY15 NFO sales fell 1% yoy (9M15: -4.3% yoy), in line with expectations as we forecast a full-year revenue decline of 4%. BST booked a one-off gain of RM18m in 3Q for the refund of stamp duty following the abortion of the SGX business trust listing. Gross prize payout ratio rose from 56.5% in 2Q to 60% in 3Q (9M15: 58.4% vs 9M14: 57.6%). We expect BST’s gaming revenue to fall by 4% p.a. in FY15 and FY16.
6.5-7% dividend yield to support share price
3QFY15 DPS of 5 sen represents a payout ratio of 76% of core net profit while 9M15 DPS of 16.5 sen works out to an 84% payout of 9M earnings, below our forecast of 90% dividend payout for the full year. We lower our payout ratio assumption from 90% to 85% for FY15-17. We believe that the slightly lower payout ratio reflects the difficult operating environment that the NFO players are facing. Tan Sri Vincent Tan has been actively acquiring BST shares since Dec 14, acquiring c.8m shares or about 0.6% of BST’s share capital. This signals baseline support for the share price.
Outlook is unexciting
The structural problems of the NFO industry persist, namely the continued strength of the illegal operators and poor enforcement. Our channel checks reveal that the illegal operators are gaining strength, with some offering mobile betting and widening their distribution network by recruiting college students, retirees and civil servants as NFO sales agents.
Source: CIMB Daybreak - 19 March 2015
Target RM3.15 (Stock Rating: HOLD)
Berjaya Sports Toto’s (BST) 9MFY4/15 core net profit of RM265m was, at 72% of our full-year forecast, within our expectations as we expect a seasonally stronger 4Q. 3Q DPS of 5 sen brought 9M15 DPS to 16.5 sen, below our full-year forecast of 24.5 sen. We maintain our EPS forecasts but lower our DPS forecasts for a payout ratio of 85% instead of 90%. Our DDM-based target price is lowered correspondingly. We maintain our Hold rating as BST’s share price will continue to be supported by its sub-7% dividend yield, internal share buybacks and external buying by major shareholder, Tan Sri Vincent Tan. We recommend Genting Malaysia for gaming exposure.
Declining NFO sales
3QFY15 NFO sales fell 1% yoy (9M15: -4.3% yoy), in line with expectations as we forecast a full-year revenue decline of 4%. BST booked a one-off gain of RM18m in 3Q for the refund of stamp duty following the abortion of the SGX business trust listing. Gross prize payout ratio rose from 56.5% in 2Q to 60% in 3Q (9M15: 58.4% vs 9M14: 57.6%). We expect BST’s gaming revenue to fall by 4% p.a. in FY15 and FY16.
6.5-7% dividend yield to support share price
3QFY15 DPS of 5 sen represents a payout ratio of 76% of core net profit while 9M15 DPS of 16.5 sen works out to an 84% payout of 9M earnings, below our forecast of 90% dividend payout for the full year. We lower our payout ratio assumption from 90% to 85% for FY15-17. We believe that the slightly lower payout ratio reflects the difficult operating environment that the NFO players are facing. Tan Sri Vincent Tan has been actively acquiring BST shares since Dec 14, acquiring c.8m shares or about 0.6% of BST’s share capital. This signals baseline support for the share price.
Outlook is unexciting
The structural problems of the NFO industry persist, namely the continued strength of the illegal operators and poor enforcement. Our channel checks reveal that the illegal operators are gaining strength, with some offering mobile betting and widening their distribution network by recruiting college students, retirees and civil servants as NFO sales agents.
Source: CIMB Daybreak - 19 March 2015
