ALTHOUGH its current ticket sales are only about 70%-75% of pre-pandemic level, Berjaya Sports Toto Bhd (BST) is expected to swiftly attain 80-85% of its pre-pandemic revenue, similar to the previous post-lockdown re-opening in 2H 2020.
A caveat – if there is any – is that a full recovery to the pre-pandemic revenue levels can only be achieved with the elimination of all existing COVID-19 standard operating procedures (SOPs), according to UOB Kay Hian Research.
For now, one of the looming catalysts that may excite punters are potential replacement draws. BST has lost a total of 37 draws due to the movement control order (MCO) during its 1Q FY6/2022.
“However, we expect the Government to (i) allow replacement draw days in 2022 to bridge the shortfall; and (ii) possibly allow more special draw days to help shore up badly-needed revenues for the government,” opined head of research Vincent Khoo in a results review.
“If the replacement and added special draws materialise, they would validate BST’s existence and importance to Government revenues.”
For its 1Q FY6/2022, BST reported a 40.7% year-on-year dip in revenue to RM797.6 mil with headline net losses of RM18 mil (-126% yoy).
The shortfall of revenue is mainly attributed to fewer draw days during the Government’s re-implemented lockdown. BST only operated for eight draw days in its 1Q F6/20Y22.
While Kedah’s lottery ban has minimal earnings impact on BST – the state only makes up about 2%-3% of the country’s total sales with 4%-5% of net profit earnings impact to BST – the outlook will be more promising if the Gaming Act amendments are back on track.
“With the Government’s steadfast efforts to curb illegal bookie operations, we believe BST can sustain an annual base revenue growth of 4%-5% yoy post COVID-19 pandemic,” UOB Kay Hian Research pointed out.
“Such growth could accelerate if the Gaming Act were to be amended to impose harsh penalties against illegal operators and their patrons (which were previously announced in Budget 2020) and to amplify the curbs against the much bigger illegal online market.”
All-in-all, the research house maintained its “buy” rating on BST with a discounted cash flow (DCF)-based target price of RM2.46.
RHB Research which also retained its “buy” call on BST (with an unchanged target price of RM2.34), expects the recovery trend to continue as the business environment returns to normalcy.
“Our FY6/2022F earnings already include cukai makmur,” noted analysts Loo Tungwye and Lee Meng Horng.
“On the Kedah outlet ban, we make no changes for now pending further clarification. Nevertheless, we note the earnings impact is minimal at circa 3% assuming all Kedah outlets are closed.”
Moreover, impact from the closure of these outlets could be mitigated by the spill-over of ticket sales into outlets located in neighbouring states, added RHB Research.
At the close of today’s mid-day trading, BST was down 2 sen or 1.02% to RM1.94 with 350,600 shares traded, thus valuing the company at RM2.62 bil. – Nov 19, 2021
