STOCK FOCUS OF THE DAY
Berjaya Sports Toto : Lower dividends HOLD
Maintain HOLD on Berjaya Sports Toto Bhd (BST) with a lower
DCF-based fair value of RM3.40/share versus RM3.45/share previously. We have
reduced BST’s FY16F EPS by 8% to account for the expiry of the Philippines
gaming concession in August 2015. The gaming concession accounts for almost 13%
of BST’s operating profits. We do not think that the gaming concession would be
renewed.
BST’s net profit is expected to decline by 19% in FY16F due
to the cost of absorbing GST (Goods and Services Tax) and expiry of the gaming
concession in Philippines. We have also assumed that BST’s ticket sales per
draw would fall by 3% in FY16F, which is the same as FY15. BST’s FY15 earnings
were within our forecast and consensus estimates. Included in BST’s FY15
results were a stamp duty refund of RM18mil for the cancellation of STM Trust’s
listing in Singapore and forex loss of RM6.2mil.
BST has declared a gross DPS of 5.0 sen for 4QFY15, which
brings total gross DPS to 21.5 sen for FY15. We have assumed a gross DPS of 18
sen for FY16F, which implies a yield of 5.5% and net payout of 82.7% (FY15:
80.3%). The motor dealership in UK accounted for 35.8% of BST’s revenue in
FY15. However in terms of bottomline the NFO division was the main earnings
generator, accounting for 95% of the group’s FY15 EBIT. The motor dealership
recorded an EBIT of RM28.9mil in FY15 versus RM14.9mil in FY14.
BST’s ticket revenue contracted by 4.2% in FY15 due to fewer
draw days. There were 178 draws in FY15 against 180 draws in FY14. On a per
draw basis, BST’s NFO sales shrank by 3.1% in FY15. As BST’s 6/63 game
was only launched in 4QFY15, we believe that the impact of the game would only
be felt in 1QFY16. BST replaced the 6/52 game with 6/63 on 21 March 2015.
We estimate BST’s prize payout at 65.2% in FY15 compared with 64.3% in FY14.
Comparing 4QFY15 against 3QFY15, BST’s ticket sales per draw inched up by 3.2%
from RM16.2mil to RM16.7mil due to the Chinese New Year festive period. Prize
payout rose to 67.7% in 4QFY15 from 65.1% in 3QFY15.
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