Berjaya Sports Toto - 3Q13 results in line, no interim dividends

Period  3Q13

Actual vs. Expectations  The 3Q13 results came in within expectations with the 9M13 core earnings of RM300.6m making up 74% and 72% of our FY13 full-year estimate and that of the market consensus respectively.

Dividends  No dividends were declared in 3Q13, the first time in three years that no quarterly interim dividends were announced. The company said it is mindful of its cash distribution in the midst of its STM-Trust listing, which is reasonable in our view. Nonetheless, the 1H13 NDPS of 16 sen made up 68.5% of the 9M13 earnings, which is not far from its 75% dividend payout policy.

Key highlights  The 3Q13 net profit contracted 24% both QoQ and YoY to RM86.1m due to a weaker luck factor as the estimated prize payout ratio (EPPR) inched up to 58.9% in 3Q13 compared to 57.5% in 2Q13 and 58.5% in 3Q12. In addition, the 3Q13 ticket sales weakened by 2% QoQ and 9% YoY as the average ticket sales per draw at RM21.2m which declined by 2% QoQ (from RM21.7m) and 7% YoY (from RM22.9m). In 3Q13, 45 draws were conducted, which was the same as 2Q13, but it was one draw lesser than the 46 draws in 3Q12.

 For the YTD, the 9M13 headline net income dropped slightly to RM309.4m from RM310.5m last year while the top line rose slightly to RM2.70b from RM2.69b. There were 134 draws conducted during the period as compared to 133 draws last year. The 9M13 EPPR improved slightly to 58.71% from 58.89% while the average ticket sales were at RM21.7m/draw from RM21.8m/draw in 9M12. There was also a RM8.8m one-off gain in 1Q13 from the disposal of an unquoted investment, i.e. Cassis International Pte Ltd.

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

Change to Forecasts  There are no changes to 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 our view that the spin-off of its NFO business to be listed as a Business Trust in Singapore may not be value-accretive and will lead to a derating 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 exp.

Source: Kenanga