Berjaya Sports Toto - 1QFY10: Fewer punters?

BToto’s 1QFY01 revenue went flat yoy as revenue per draw unexpectedly declined 6.6% due to weak ticket sales. No dividend was declared for the current quarter. The annualised net earning is 9.2% below our expectation.

Berjaya Sports Toto (BToto) reported a net profit of RM100.5m in 1QFY10 (+8.7% yoy, -6.3% qoq). The yoy rise in net profit was attributed to a lower estimated prize payout ratio of 61.2% vs 62.5% in 1QFY09. 1QFY10 revenue was flat yoy and 5.1% lower qoq despite there being three draws more than the year-ago quarter. Annualised net earnings are 9.2% below our estimate but 1QFY10 was expected to be a seasonally weak quarter with fewer festive days. No dividend is declared for the current quarter, which is in line with our expectation.


Gross revenue per draw unexpectedly declined 6.6% yoy (from RM22.9m to RM21.4m), as the economic slowdown probably hurt tickets sales to the blue-collar segment. Consumption falloff offset the impact of three additional draws in 1QFY10 (compared with 1QFY09). Nevertheless, we expect revenue to improve in 2HFY10 with the new launch of Power Toto 6/55 game in Nov/Dec 09 and on the back of a stronger economic recovery. We forecast gross revenue per draw to improve 1-3% on the back of this new game after factoring in cannibalisation effect on existing games.

No dividends as expected. BToto has front-loaded its FY10 dividend payout (net: 19 sen) in 4QFY09, totalling about RM238.6m, which is equivalent to 237.6% of its 1QFY10 net profit. To finance the dividend, BToto has taken a five-year term loan (RM380m) with an interest rate of about 5%. As at 31 Jul 09, its net debt stood at RM359m and its interest cover is expected to remain healthy at 18x for FY10.

Maintain BUY but no near-term upside catalyst. Based on DCF valuation (cost of equity of 8.9% and terminal growth of 1%), we value BToto at RM4.90/share, which implies prospective FY10 and FY11 PEs of 15.0x and 14.4x respectively. We like the stock as a defensive play and its gross dividend yields should remain attractive at 7-8% beyond FY10.