BERJAYA SPORTS TOTO BHD

Target Price: RM3.05

MAYBANK Research said BJToto’s earnings were in-line with expectations but dividends missed a tad.

The company’s first quarter FY18’s core net profit of RM71.2mil (+3% year-on-year (yoy), +2% quarter-on-quarter) was within its expectations at 23% of its full year estimates.

The quarter’s revenue of RM1.47bil and earnings before interest, taxes, depreciation and amortisation of RM130.8mil were also in-line at 26% and 25% of its full year estimates respectively.

However, it said that dividends marginally disappointed at 22% of its full year estimates.

“We maintain our buy call and RM3.05 sum of parts-based target price.

“More importantly, we hope that the y-o-y decline in gaming revenue/draw will come to an end thanks to recent crackdowns on illegal number forecast operators (NFOs) and legislation will be passed to cement these gains,” it said.

“Our earnings per share and dividend per share (DPS) estimates are unchanged. Our DPS estimates translate into very attractive dividend yields of more than 7.8%. Even if the first quarter DPS of four sen were annualised, BJToto still offers very attractive dividend yields of more than 6.9%,” it added.

It noted that gaming revenue/draw have been struggling to grow due to competition from the illegal NFOs.

“We understand that the respite in the first quarter was due to the recent crackdowns on illegal NFOs. We hope that amendments to the Common Gaming Houses Act and Cyber Security Act will be passed soon to cement recent market share gains,” the research house said.

“Until then, our EPS and DPS estimates are unchanged. On the latter, BJToto typically declares more dividends in the second to fourth quarter to bring full year dividend payment ratio to more than 75%,” it added.