BST’s earnings to decline due to temporary closures of operations
KUCHING: Berjaya Sports Toto Bhd’s (BST) earnings are expected to decline due to the temporary closures of its operations in line with the movement control order (MCO).
However, analysts remain optimistic on the group’s prospects given stringent enforcement by the authorities in curbing the activities of illegal number forecast operators (NFO).
In a report, the research team at AllianceDBS Research Sdn Bhd (AllianceDBS Research) said: “We are positive that as a dominant player in the NFO sector, the group will continue to benefit from the more stringent enforcement by the authorities in curbing the activities of illegal NFOs.
“In the later part of this year, we expect the clampdown on illegal NFOs to further intensify with the enforcement of minimum penalties for both sellers and punters in the illegal NFO market, which could be another catalyst for the sector.”
It also believed the stock’s attractive dividend yield of more than six per cent would continue to support its share price.
Nevertheless, it pointed out that BST has temporary closed its operations due to the 42-day MCO imposed by the government effective from March 18 in response to the Coronavirus Disease 2019 (Covid-19) outbreak.
“There will 19 draws lost (out of 167 draws in FY20) during the MCO. We estimate BST’s earnings to fall by circa 12 per cent due to the temporary closure,” it added.
AllianceDBS Research also foresee an increasingly challenging operating environment for its subsidiary HR Owen, a franchise motor vehicle dealership in the UK.
“Our concerns mainly stem from the ongoing Covid-19 pandemic which has led to a temporary lockdown in the UK and issues related to the UK’s exit from the European Union (Brexit).
“Nonetheless, we wish to highlight that HR Owen’s profit contribution to the group is relatively small. In FY19, HR Owen accounted for circa 10 per cent of the group’s earnings,” it added.
AllianceDBS Research cut its FY20 to FY22 earnings forecast by one to 13 per cent, mainly to account for reduction of 19 draws in FY20 and lowering contribution from HR Owen.
Nevertheless, it maintained its ‘buy’ recommendation on the stock.