B Sports Toto - Healthy ticket sales growth

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

- BToto’s 1QFY13 results were in line with our expectations and consensus estimates as we expect the prize payout to increase in the following financial quarters. The group’s net profit rose 20.2% YoY to RM110.7mil in 1QFY13, underpinned by an RM8.8mil gain on disposal of investments, 6.4% expansion in revenue and lower prize payout.   

- BToto has received approvals from Bank Negara Malaysia and the Ministry of Finance to list its lottery operations in Singapore via a business trust. 

- What are outstanding are approvals from the authorities in Singapore, BToto’s shareholders and holders of the RM550mil medium-term notes. 

- The listing of Sports Toto Malaysia-Trust (STM-Trust) is expected to take place at the end of the year. The IPO prospectus is targeted to be issued by 4Q2012. Upon receipt of proceeds from the listing of STM-Trust, BToto would pay out special or additional dividends of 40-50 sen/share.

- After the listing of STM-Trust, we estimate that BToto’s FY14F net profit would decline 20% to 25% due to the increase in minority interest. BToto would be a holding company of STM-Trust. We have not factored in the impact of the listing of STM-Trust in our earnings forecasts yet. 

- BToto’s ticket sales per draw rose 6% YoY to RM17.7mil in 1QFY13. There were 44 draws each in 1QFY13 and 1QFY12. 

- BToto’s ticket sales per draw were robust due to a full quarter of earnings contributions from the 4D Jackpot game, which was launched in June 2011. Also, there was good response to the Power Toto 6/55 game. Currently, the first prize of the Supreme Toto 6/58 game is RM36.1mil. 

- In comparison, Magnum Corporation’s gross ticket sales per draw shrank 2.9% YoY in 1HFYE12/12.

- BToto’s NFO operating profit climbed 13.7% YoY to RM117.2mil in 1QFY13 due to higher sales and a decrease in the prize payout ratio. We estimate the prize payout at 63.4% in 1QFY13 versus 64.4% in 1QFY12.

- On a QoQ basis, BToto’s ticket sales were relatively flat in 1QFY13. There were 44 draws in 1QFY13 against 45 draws in 4QFY12. Prize payout slid from an estimated 66.4% in 4QFY12 to 63.4% in 1QFY13.  

Source: AmeSecurities