BToto’s annualised 1QFY13 numbers were largely within our and consensus expectations. Its relatively stable and defensive earnings as well as the strong likelihood of an upside dividend surprise make it an ideal stock to hold amid thecurrent volatility. The share price is supported by a net dividend yield of 6.2%, which may potentially rise to 7.3%, assuming a 100% payout ratio. Maintain BUY, with an unchanged FV of RM5.01.
In line. After stripping out RM8.8m in an exceptional gain on the disposal of unquoted investments, BToto’s annualised 1QFY13 earnings were largely in line, at 24.2% and 23.8% of consensus and our full-year forecasts respectively. Its key subsidiary, Sports Toto Malaysia, registered revenue and pre-tax profit growth of 6% and 15% respectively. Revenue growth was primarily driven by stronger Jackpot sales, while the growth in pre-tax profit relative to revenue got a boost from a lower prize payout ratio. Sequentially, its core Sports Toto gaming business registered a revenue compression of 1.8% q-o-q, given the traditionally stronger 4Q period. However, pre-tax profit expanded 24.4% q-o-q on the back of lower prize payout ratios. The group declared a first single-tier interim dividend per share of 6.5 sen (vs 1Q12’s 8 sen), representing a payout ratio of 77.6% and lower than our full-year assumption of 87%. However, we believe that there is scope for payouts to normalise upwards over the course of the year and sustain at relatively high levels of 85% to 95%, once it completes the value-unlocking listing of its Sports Toto Malaysia Trust (STM Trust).
Earnings dilution partially offset by front-loaded dividends. BToto’s earnings are expected to slip by 18.6% after selling off its 20.5% stake in STM Trust as part of a proposed listing exercise. However, we note that the entire corporate proposal is expected to unlock RM1.1bn in cash proceeds for BToto, thus providing ample scope for the group to raise its ROEs via a more proactive front-loaded capital management exercise that would entail a combination of special dividends and a near-100% recurring
dividend payout vs our current assumption of a 87% recurring payout. Concerns of a holding company discount may be mitigated by the fact that units in the STM Trust could eventually be distributed back to BToto shareholders.
Maintain BUY, keeping FV. We are maintaining our BUY recommendation and the FV of RM5.01. We assume that there is a high likelihood of BToto distributing a meaningful sum as a special dividend upon the completion of the proposed corporate exercise, while the small-ticket nature of its gaming business provides a certain degree of demand and hence, assures revenue resilience even in times of economic uncertainty.
In line. After stripping out RM8.8m in an exceptional gain on the disposal of unquoted investments, BToto’s annualised 1QFY13 earnings were largely in line, at 24.2% and 23.8% of consensus and our full-year forecasts respectively. Its key subsidiary, Sports Toto Malaysia, registered revenue and pre-tax profit growth of 6% and 15% respectively. Revenue growth was primarily driven by stronger Jackpot sales, while the growth in pre-tax profit relative to revenue got a boost from a lower prize payout ratio. Sequentially, its core Sports Toto gaming business registered a revenue compression of 1.8% q-o-q, given the traditionally stronger 4Q period. However, pre-tax profit expanded 24.4% q-o-q on the back of lower prize payout ratios. The group declared a first single-tier interim dividend per share of 6.5 sen (vs 1Q12’s 8 sen), representing a payout ratio of 77.6% and lower than our full-year assumption of 87%. However, we believe that there is scope for payouts to normalise upwards over the course of the year and sustain at relatively high levels of 85% to 95%, once it completes the value-unlocking listing of its Sports Toto Malaysia Trust (STM Trust).
Earnings dilution partially offset by front-loaded dividends. BToto’s earnings are expected to slip by 18.6% after selling off its 20.5% stake in STM Trust as part of a proposed listing exercise. However, we note that the entire corporate proposal is expected to unlock RM1.1bn in cash proceeds for BToto, thus providing ample scope for the group to raise its ROEs via a more proactive front-loaded capital management exercise that would entail a combination of special dividends and a near-100% recurring
dividend payout vs our current assumption of a 87% recurring payout. Concerns of a holding company discount may be mitigated by the fact that units in the STM Trust could eventually be distributed back to BToto shareholders.
Maintain BUY, keeping FV. We are maintaining our BUY recommendation and the FV of RM5.01. We assume that there is a high likelihood of BToto distributing a meaningful sum as a special dividend upon the completion of the proposed corporate exercise, while the small-ticket nature of its gaming business provides a certain degree of demand and hence, assures revenue resilience even in times of economic uncertainty.
Source: OSK
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