Berjaya Sports Toto Bhd
(Dec 19, RM3.53)
Maintain “outperform” with target price of RM4.25: BToto’s net income for the second quarter ended October of financial year 2015 (2QFY15) leapt 27% quarter-on-quarter (q-o-q) to RM99.7 million from RM78.3 million while the top line inched up by 1%. The stronger growth in bottom line as opposed to top line was due to a better luck factor with estimated prize payout ratio (EPPR) of 57.3% against 59.9% previously. Revenue for number forecast operator (NFO) segment, meanwhile, grew 5% on the back of higher tickets of RM898.4 million from RM857.4 million due to higher draw days of 45 conducted in 2QFY15 from 42 draws previously.
However, average ticket sales per draw continued to trend downward to RM20 million from RM20.4 million in 1QFY15. On the other hand, the higher NFO revenue was mitigated by lower revenue of 5% reported by HR Owen (HRO) due to foreign exchange differences while sales volume was fairly flattish.
Year-on-year (y-o-y), 2QFY15 net profit jumped 21% on the back of 45% surge in revenue while first half (1H) net earnings dipped 2% despite turnover soaring 42% over the period. The significant improvement in top line was mainly driven by the consolidation of HRO results in 3QFY14. The improved 2QFY15 results were led by better EPPR of 57.3% from 59.7% while the decline in 1HFY15 earnings was attributable to higher interest expenses arising from the HRO acquisition.
The forward NFO ticket sales remain resilient with about 3% annual growth. Unlike Magnum which faces a volatile luck factor, BToto’s prize payout ratio is less volatile over the quarters given its wider spread of lotto games and 4D games. — Kenanga Research, Dec 19
This article first appeared in The Edge Financial Daily, on December 22, 2014.