Challenging year ahead seen for BToto

ser- KUALA LUMPUR: Berjaya Sports Toto Bhd could be facing a more challenging second half of its financial year 2019 (2H19) due to a reduction in the number of special draw days effective 2019.

“We are expecting a contraction in earnings for 2H19 as there would be fewer draw days due to the reduction in the overall number of special days starting in 2019,” Affin Hwang Research said in a report.

The research house retained its earnings per share forecast and target price of RM2 while maintaining its “hold” recommendation due to limited upside from current levels.

The numbers forecast operator’s net profit of RM147.2mil in the first half of FY2019 came in slightly ahead of Affin HWang’s full-year forecast and was in line with consensus estimates.

According to the research house, Berjaya Sport’s Toto’s profit before tax in 1H19 was flat year-on-year despite revenue dropping 0.6%.

“The flattish earnings were supported by the strong performance in 1Q19 as the company benefited from the tax holiday period and lower prize money payout during the quarter.

“Without the benefit of both, profit before tax contracted significantly in 2Q19 (-13.4% year-on-year; -21.2% quarter-on-quarter).”

Affin Hwang Research said the stronger-than-expected revenue from the Philippines leasing was a positive surprise as the management was able to lower cost to improve profitability.

“However, we believe that the revenue growth is not sustainable as the fees on the leasing contract to supply lottery equipment in Luzon is likely to be renewed at a lower rate moving forward.”

In the UK motor division, earnings momentum was slow in 2Q19 due to the delay in new car delivery due to the new changes to the emission testing of all new vehicles.