Wednesday, September 21, 2011

Berjaya Sports Toto: 4D Jackpot – The Lucky Charm

Industry: Gaming
4D Jackpot – The lucky charm

22 September 2011
Price Target: RM4.98
Share Price: RM4.35


Results
In line – Reported 1QFY12 net profit of RM93.8m came in within expectation, accounting for 23.1% of HLIB’s estimate and 24.2% of consensus full year estimates. Historically, 1Q results normally contributed 22-24% of full year earnings.

Deviations
None

Dividends
Declared first interim single tier exempt dividend of 8 sen per share (1QFY11: 8 sen) with ex and payment dates on 6 and 10 Oct respectively.

Highlights
# 1QFY12 net profit improved 43.7% yoy, thanks to additional revenue contribution from the new 4D Jackpot game (introduced in June 2011) and lower prize payout (~62% vs ~65% a year ago).

# Qoq, net profit declined by 11.2% to RM93.8m due to seasonal factor (as 4Q has been historical stronger on the back of Chinese New Year festival) and lesser draw days in the current quarter (44 days vs. 45 days in 4QFY11).

# 4D Jackpot’s contribution towards BToto’s earnings remains exciting as sales per draw was stable at an average of RM1.6m. YTD, 4D Jackpot segment has achieved 38% of market share.

# For the jackpot games segment as a whole, total sales has been above Magnum’s sales since the launch of 4D Jackpot. It achieved total sales per draw of RM101.5m in
1QFY12 vs. RM71.9m in 1QFY11, or a 41.1% jump.

Risks
- Higher-than-expected prize payout ratio.
- PMP to possibly launch its own 4D Jackpot.
- Hike in pool betting duty/gaming tax.

Forecasts
Maintained.

Rating - BUY
Positives
(1) 4D Jackpot continues to show strong sales
(2) Monopoly of lotto games;
(3) Highest-yielding stock in the gaming sector

Negatives
(1) Highly regulated industry; and
(2) Prize payout highly dependable on luck factor

Valuation
Target Price maintained at RM4.98 based on Discounted Cash Flow (DCF) model at WACC of 8.8% and long-term growth of 2.5%.


Source: HLIB Research

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