AmResearch Sdn Bhd has affirmed its trading "buy" on Berjaya Corp Bhd (BCorp) (3395) and raised the stock's fair value from RM1.80 per share to RM2.15 per share.
"The raised fair value is based on 30 per cent discount to our revised fully diluted net asset value of RM3.08 per share. The litmus test is now execution and balance sheet re-engineering to improve return on equity," the research house said yesterday.
On Wednesday, BCorp said it was acquiring a 70 per cent stake in Ascot Sports Sdn Bhd from its chairman Tan Sri Vincent Tan for RM525 million cash. Ascot has been given the exclusive approval to operate sports betting.
"The deal appears to be structured to underpin BCorp's share price - given a low acquisition price-to-earnings of just six times. Such a move should ensure that the market re-rates BCorp to account for its strong growth potential, as Tan owns 48 per cent of Bcorp," it added.
AmResearch added that based on its discounted cashflow model and BCorp's 70 per cent stake, it estimated the accretion to its net asset value to be RM3.9 billion or RM0.33 per share.
"We have raised our fully diluted NAV by 12 per cent from RM2.75 per share to RM3.08 per share," it said.
OSK Research Sdn Bhd expects the group to lobby for an attractive gaming tax structure of 10 per cent of gross wins versus the 25 per cent level imposed on its sports betting counterparts in Singapore.
"Even if we assumed that the legal sports betting market was equivalent to an ultra optimistic RM19.9 billion and assuming that 40 per cent of the bets were to be transacted at BToto outlets, we estimate that a 60:40 sharing arrangement with BToto's agents on a gross 1 per cent agency commission would raise BToto's FY11/12 earnings by 10.3 per cent to 9.4 per cent," it said.
However, OSK believes that a more realistic benchmark for the legal sports betting market may be 0.5 per cent to 0.6 per cent of the country's gross domestic product, which implies a market of RM6.4 billion to RM7.7 billion in Malaysia.
"Under a more realistic RM6.4 billion legal sports betting market, the agency commission boost to BToto's earnings would be 2.6 per cent on our FY11 earnings estimates.
"That said, given BToto's initial retail distribution monopoly, it could benefit from some spillover effect from marginal gambling demand on its number forecast operator and lottery products," OSK added.
This is a rather old news, published in May 2010 if not mistaken.
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