AGAINST the backdrop of sales recovery by number forecast operators (NFO) in 1Q FY2023F, Berjaya Sports Toto Bhd can expect its earnings prowess to normalise to pre-COVID-19 level.
Despite the recent Omicron wave, the sales/draw of subsidiary Sports Toto Malaysia Sdn Bhd (STM) has continued to recover to circa 85% of pre-COVID-19 levels from 70-75% in its 2Q FY6/2022, according to Maybank IB Research.
“This confirms our belief that Malaysians are still inclined to participate in gaming despite the risk of being infected with COVID-19 as long as the risk of serious health complications is low,” opined analyst Yin Shao Yang following a post-2Q FY6/2022 results conference call hosted by Berjaya Sports Toto.
“Thus, we maintain our estimates which assume that STM sales/draw will recover to 75%/90%/92% of pre-COVID-19 levels in FY2022E/FY2023E/FY2024E.”
Maintaining its “buy” call on Berjaya Sports Toto with an unchanged DCF (discounted cash flow)-based target price of RM2.24, Maybank IB Research said the company still expects to incur the windfall tax (Cukai Makmur) in 3Q FY6/2022 and 4Q FY6/2022 although it has an un-utilised tax losses from Malaysian sources amounting to RM8.5 mil as of end-FY6/2021.
“(On the) longer term, we are positive that Berjaya Sports Toto intends to be a pure gaming company which implies that it will sell its non-gaming assets (eg UK-based luxury car distributor H.R. Owen),” projected the research house. “We continue to like the company as a high dividend yielding recovery play.”
Recall that Berjaya Corp Bhd’s CEO Abdul Jalil Rasheed has stated plans are afoot for H.R. Owen to be sold to conglomerate Berjaya Corp which currently holds a 7.6% stake in Berjaya Sports Toto.
“Yet, Berjaya Sports Toto stated that it will wait for H.R. Owen to complete its large showroom in Hatfield and build its distributorship network first. If the disposal were to materialise at a reasonable price, we would view it positively,” added Maybank IB Research.
Meanwhile, CGS-CIMB Research said Berjaya Sports Toto hopes to maintain a 75% dividend pay-out ratio (DPR) in 2H FY6/2022 with dividend per share (DPS) normalisation in FY6/2023.
The company declared a 1 sen dividend for its 2Q FY6/2022 (2Q fy6/2021: 2.5 sen) which brings its total pay-out to-date to 2 sen (1H FY6/2021: 6.5 sen).“BST cited the need to rebuild its cash reserves (after the NFO outlet closures due to the full movement control order in June-September 2021) as the reason for its lower 1H FY6/2022 DPR of 75% (FY 6/2018-2020: 92-105%),” analysts Sherman Lam Hsien Jin and Foong Choong Chen pointed out.
“It said it will attempt to maintain the 75% DPR in 2H FY6/2022F depending on the pace of NFO sales recovery, and noted that the Cukai Makmur tax will only be recognised in 2H FY6/2022. Thereafter, it hopes DPS can normalise to pre-COVID-19 levels (circa 4 sen per quarter) in FY 6/2023F.”
At 11.04am, Berjaya Sports Toto was up 1 sen or 0.53% to RM1.91 with 75,000 shares traded, thus valuing the company at RM2.58 bil. – Feb 24, 2022
