BToto listing at challenging time

by **Cals** Tue 17 Sep 2013, 09:39

BToto listing at challenging time
Business & Markets 2013
Written by HwangDBS Vickers Research
Tuesday, 17 September 2013 09:27

BERJAYA SPORTS TOTO BHD []
(Sept 13, RM4.16)
Maintain hold with target price of RM4.30: Berjaya Sports Toto’s (BToto) net profit for the first quarter of 2014 fianancial year (1QFY14) came in at RM94 million, constituting 22% of consensus and 25% of our full-year estimates. A first interim dividend of four sen was declared, lower than 1QFY13’s 6.5 sen, while dividend payout works out to just 54%, below BToto’s 75% dividend policy. We could see dividend per share (DPS) accelerating in future quarters or be in the form of dividend-in-specie as BToto has been buying back shares.

Revenue draw for 1QFY13 fell 3.7% year-on-year (y-o-y) and 4.5% quarter-on-quarter (q-o-q), on top of lower lease rental income in The Philippines. The q-o-q results were dragged down by one less draw and seasonally stronger Chinese New Year impact on 4QFY13. A more favourable prize payout of 58% supported margins. BToto remains new fund offer (NFO) market leader with 42% revenue share against MPHB Capital Bhd’s 34%.

Its proposed listing of STM Trust in Singapore will be delayed from November 2013 to January 2014. Singapore REITs and business trusts have underperformed recently, given rising bond yields as the US hints at tapering off its quantitative easing as early as this month. STM Trust’s expected yield of 6% is also marginally below Singapore REITs’ average of 6.7%.

There is potential for special dividends post-restructuring, estimated at 40 sen from an offer for a placement of STM Trust shares, and at a later stage, potential dividend-in-specie of STM Trust shares. The restructuring should expand the shareholder base, provide access to cheap financing and halve gearing to 0.6 times.

Maintain “hold” and sum- of-parts-based target price of RM4.30. We have yet to factor in the impact of the restructuring, which could see 15% lower earnings as BToto’s effective stake in its Malaysian NFO business will reduce from 100% to 80%. BToto risks being overlooked for STM Trust directly or Magnum. — HwangDBS Vickers Research, Sept 13

This article first appeared in The Edge Financial Daily, on September 17, 2013.