Monday 17 Jun 2024
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KUALA LUMPUR (May 27): Shares in Sports Toto Bhd (KL:SPTOTO) rose to their highest in 18 months, after the lottery operator reported quarterly results that came in stronger than expected.

Sport Toto climbed as much as 7.7% or 12 sen to RM1.67 on Monday, its highest since September 2022. The stock closed Monday at RM1.59, valuing the company at RM2.15 billion. More than two million shares had changed hands, more than triple that of the 200-day moving average.

Core net profit for the nine months ended March 31, 2024 (9MFY2024) accounted for more than 80% of the consensus full-year forecast, though the majority of analysts doubted further upside to Sports Toto's share price, and flagged that earnings growth may ease ahead.

Sports Toto’s lottery segment benefited from seasonally stronger sales, but this is likely to normalise in the fourth quarter ending June 30, 2024 (4QFY2024), said Hong Leong Investment Bank (HLIB).

Sales volume for the car dealership business may also normalise in 4QFY2024, the research house noted. “The segment could continue to be affected by high financing costs in the UK, while at the same time juggling higher depreciation and operating costs,” HLIB said.

Shares in Sports Toto have risen 9.5% so far this year, amid a strong recovery of the lottery segment, while its luxury car retailing unit HR Owen plc benefited from the number plate change month despite tough economic conditions in the UK.

A majority of five out of seven analysts covering Sports Toto recommended ‘hold’ calls, while the remaining two had ‘buy’ ratings, according to Bloomberg. The target prices range from RM1.36 to RM1.72.  

Maybank Investment Bank, one of the two research houses with ‘buy’ ratings, said that Sports Toto’s lottery business had largely recovered, with the gap between pre- and post-pandemic sales per draw narrowing to about 5%.

Further, Sports Toto still offers “very attractive” annual dividend yields of 7.1%, which is more than the current yield on 10-year Malaysian Government Securities of 3.9%, the house added.

On its part, the company said its outlook remains “positive and stable” for 4QFY2024.

Last Friday, Sports Toto reported that its net profit for 3QFY2024 was RM68.45 million, compared with RM23.22 million a year earlier. Revenue inched up 2.4% to RM1.69 billion from RM1.66 billion, according to a bourse filing.

For 9MFY2024, net profit dropped 4.2% to RM152.83 million from RM159.58 million. The company's nine-month top line, however, rose 3.9% to RM4.66 billion from RM4.48 billion previously.

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