Berjaya Sports Toto - Dual listing of business trust ? HOLD

 - Under Budget 2013, the Malaysian government has announced that it would amend the Capital Market and Services Act 2007 to provide an  option for carrying out business operations through a new structure, known as a business trust. 

- The government has proposed that the business trust be given the same tax treatment as a company. 

- It has proposed that the transfer of any business, asset and real property to a business trust be given stamp duty exemption and real property gains tax exemption at the early stage of the establishment of a business trust. 

- Due to this, we reckon that there is potential for Berjaya Sports Toto’s (BST) business trust, which would be listed in Singapore by year-end, to be listed in Malaysia in the future also.

- However, we reckon that this would not be immediate as it would take time for Malaysian lawmakers to amend the Capital Market and Services Act 2007. 

- In Singapore, a business trust is allowed to distribute dividends from its operating cashflows. 

- Currently, companies in Malaysia are only allowed to pay dividends from their net profits. There were no details on the distribution of dividends by a business trust in Budget 2013.

- Distributing dividends from operating cashflows would mean higher dividend payments for shareholders as operating cashflows are usually higher than net profits. 

- We reckon that companies with strong and recurring cashflows would be able to list their assets in a business trust. 

- We maintain a HOLD on BST. The group has received approvals from authorities in Malaysia to list its lottery assets in a business trust in Singapore. 

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

Source: AmeSecurities