Berjaya Sports Toto - No surprises in 1Q13 results

Period   1Q13

Actual vs.  Expectations

The 1Q13 results were fairly in line with its core net profit of RM101.9m making up 25% of our FY13 full year estimate as well as that of the market consensus. 

Dividends  A 6 sen net DPS (entitlement date: 09 Oct 2012; payment date: 16 Oct 2012) was declared in 1Q13, translating to a payout ratio of 77.5%, which was lower than the 10 sen net DPS paid in 1Q12. 

Key highlights

The 1Q13 headline net profit rose 21% QoQ and 20% YoY to RM110.7m, mainly driven by a RM8.8m one-off gain on disposal of unquoted investment i.e. Cassis International Pte Ltd. ExEI, 1Q13 core earnings were RM101.9m.

Despite flattish QoQ ticket sales, the reported 1Q13 EBIT rose 12% to RM153.0m, helped by better luck as the estimated prize payout ratio (EPPR) dropped to 59.9% from 60.9% in 4Q12.

1Q13 saw 44 draws conducted, which was the same as the preceding quarter while the average ticket sales remained at RM22.0m/draw. 

On a YoY comparison, 1Q13 ticket sales grew 6% to RM969.2m from RM913.3m previously due to a high jackpot in the Power Toto 6/55 game and a full three-month effect of the 4D Jackpot game compared to 1½ months in 1Q12. Thus, the average ticket sales per draw improved to RM22.0m from RM20.8m. 1Q13 EBIT rose 9% from RM139.9m, partly attributable to a lower EPPR of 59.9% from 60.3% previously. 

Outlook  The forward NFO sales/profits remain resilient, but the net earnings and dividend are set to decline post-listing of  STM-Trust by c.9% and c.20% respectively. 

Change to Forecasts

We are keeping our FY13-FY15 estimates for now. We will adjust our earnings model once the listing of the Business Trust on SGX-ST is completed.  

Rating  MAINTAIN UNDERPERFORM

We maintain the view that the spin-off its NFO business to be listed as a Business Trust in Singapore may not be value-accretive and will lead to a de-rating of the stock by the market.

Valuation   Our price target of RM3.88/share is maintained. This  is  based  on  the  floor valuation, which includes a 10% holding company discount to its RNAV and a 49 sen special dividend. 

Risks  The risks to our estimates are stronger than expected ticket sales and a lower than expected EPPR.

Source: Kenanga