Berjaya Sports Toto - Recovery in ticket sales HOLD

-  Maintain a HOLD on Berjaya Sports Toto (BToto) with an unchanged DCF-based fair value of RM4.70/share. 

-  BToto’s FY12 results were in line with our expectations and consensus estimates. The group recorded a 5.1% expansion in revenue and a 14.9% improvement in net profit in FY12.   

-  BToto has declared a final gross DPS of 5 sen for 4QFY12, which brings total gross DPS to 27 sen for FY12 (FY11: 21 sen). This translates into an attractive yield of 6.4%. 

-  For FY13F, we have forecast ticket sales per draw to increase by 3%. We have also assumed a prize payout of 65%. 

-  We are neutral on the listing of Sports Toto Malaysia Trust in Singapore. 

-  BToto would essentially be a holding company after the proposed listing with insignificant earnings contribution from Berjaya Philippines and International Lottery Totalisator Systems, U.S.  

-  BToto’s ticket sales rose 4.8% YoY to RM3.4bil in FY12. On a per draw basis, NFO revenue inched up 3.6% to RM17.6mil. There were 178 draws in FY12 and 176 draws in FY11.

-  BToto benefited from positive response to its 4D Jackpot game and Supreme Toto 6/58 game, which had its first prize money snowballing to RM58mil in January 2012. 

-  NFO operating profit strengthened 10.5% YoY to RM461mil in FY12 on the back of a lower prize payout and higher revenue. 

-  We estimate prize payout at 64.8% in FY12 against 65.4% in FY11.

-  Against 3QFY12, ticket sales in 4QFY12 fell 7.2% to RM861.1mil. 3QFY12 enjoyed positive ticket revenue from the Chinese New Year festive demand. 

-  On a per draw basis, NFO revenue shrank 5.1% QoQ to RM17.6mil in 4QFY12. There were 45 draws in 4QFY12 versus 46 draws in 3QFY12. 

-  BToto’s EBIT margin declined from 17.2% in 3QFY12 to 14.3% in 4QFY12 on the back of an increase in the prize payout ratio. We estimate prize payout ratio at a high 67.4% in 4QFY12 against 63.3% in 3QFY12.

Source: AmeSecurities