Berjaya Sports Toto Bhd (Dec 8, RM4.14)
Maintain buy at RM4.15 with revised target price of RM4.95: Taking a cue from the relatively flat 1QFY12 dividend payout (net dividend per share was flat year-on-year at 8 sen), we trim the FY12/FY13 dividend payout ratio from a more aggressive 90% to 80% of annual earnings (similar to FY11 payout). This results in a 4% to 7% cut in FY12/FY13’s net dividend per share (DPS).
Despite the DPS cut, we continue to like BToto for its highly cash generative and asset light business model.
We project a robust CY12 free cash flow yield of 8% underpinned by minimal FY12 to FY14 capital expenditure requirements, atypical of the highly regulated numbers forecast operations (NFO) industry.
Against this backdrop, we opine BToto will remain a high-yield defensive hideout from the external economic uncertainties. The stock, in our view, offers investors above market net yields of 6%.
We maintain our “buy” call with a lowered discount dividend model-based target price of RM4.95 (discount rate 8%, growth rate 3%) in tandem with the lowered DPS.
Our recent discussions with the company suggest that BToto may see only a moderate single digit top line growth in FY12 as there is always the risk that the launch of BToto 4D Jackpot may cannibalise its 4D ticket sales. If we strip out BToto’s 4D Jackpot and Lotto revenue from 1QFY12’s top line, we estimate that 4D ticket sales fell 4.4% quarter-on-quarter (q-o-q).
We believe this is due to a seasonally strong 4QFY11 (coinciding with Chinese New Year) and partly cannibalisation of the 4D Jackpot. At this juncture, we maintain our conservative 4.5% year-on-year (y-o-y) top line growth for FY12 to FY14 with upside towards FY13/FY14 as its 4D Jackpot gains further traction with punters.
Results for 2QFY12, to be released next Monday, may continue to see top line growth despite the cannibalisation as the total 4D Jackpot and Lotto sales surged 47.4% q-o-q. Drivers are: (i) full three months’ contribution from 4D Jackpot (launched in June 2011); and (ii) a run-up in the Supreme 6/58 prize monies.
We also do not expect any swings in prize payouts in 2Q. We project FY12 net earnings of RM405.3 million (+16.4% y-o-y), driven by: (i) full-year impact of lower prize monies (to counter higher betting duties); and (ii) a modest 4.5% y-o-y revenue growth. — Affin IB Research, Dec 8
This article appeared in The Edge Financial Daily, December 9, 2011.
Maintain buy at RM4.15 with revised target price of RM4.95: Taking a cue from the relatively flat 1QFY12 dividend payout (net dividend per share was flat year-on-year at 8 sen), we trim the FY12/FY13 dividend payout ratio from a more aggressive 90% to 80% of annual earnings (similar to FY11 payout). This results in a 4% to 7% cut in FY12/FY13’s net dividend per share (DPS).
Despite the DPS cut, we continue to like BToto for its highly cash generative and asset light business model.
We project a robust CY12 free cash flow yield of 8% underpinned by minimal FY12 to FY14 capital expenditure requirements, atypical of the highly regulated numbers forecast operations (NFO) industry.
Against this backdrop, we opine BToto will remain a high-yield defensive hideout from the external economic uncertainties. The stock, in our view, offers investors above market net yields of 6%.
We maintain our “buy” call with a lowered discount dividend model-based target price of RM4.95 (discount rate 8%, growth rate 3%) in tandem with the lowered DPS.
Our recent discussions with the company suggest that BToto may see only a moderate single digit top line growth in FY12 as there is always the risk that the launch of BToto 4D Jackpot may cannibalise its 4D ticket sales. If we strip out BToto’s 4D Jackpot and Lotto revenue from 1QFY12’s top line, we estimate that 4D ticket sales fell 4.4% quarter-on-quarter (q-o-q).
We believe this is due to a seasonally strong 4QFY11 (coinciding with Chinese New Year) and partly cannibalisation of the 4D Jackpot. At this juncture, we maintain our conservative 4.5% year-on-year (y-o-y) top line growth for FY12 to FY14 with upside towards FY13/FY14 as its 4D Jackpot gains further traction with punters.
Results for 2QFY12, to be released next Monday, may continue to see top line growth despite the cannibalisation as the total 4D Jackpot and Lotto sales surged 47.4% q-o-q. Drivers are: (i) full three months’ contribution from 4D Jackpot (launched in June 2011); and (ii) a run-up in the Supreme 6/58 prize monies.
We also do not expect any swings in prize payouts in 2Q. We project FY12 net earnings of RM405.3 million (+16.4% y-o-y), driven by: (i) full-year impact of lower prize monies (to counter higher betting duties); and (ii) a modest 4.5% y-o-y revenue growth. — Affin IB Research, Dec 8
This article appeared in The Edge Financial Daily, December 9, 2011.
