BToto’s 1Q net profit falls 36% to RM64m

Berjaya Sports Toto Bhd’s (BToto) net profit fell 36% to RM64 million in its first quarter ended July 31, 2010 (1QFY11) from RM100 million a year earlier, due to a higher finance cost and lower revenue reported by Berjaya Philippines Inc.

Revenue, however, rose 1.1% to RM835.4 million from RM826.2 million a year earlier, with basic earnings per share (EPS) at 4.78 sen versus 7.97 sen.

It declared a first interim single tier exempt dividend of eight sen per share.

In its notes to Bursa yesterday, BToto said its principal subsidiary Sports Toto Malaysia Sdn Bhd saw pre-tax profit falling 23.6% from a year earlier, due to the increase in pool betting duty to 8% from 6%. That came into effect in June. This was coupled with a relatively higher prize payout, it added.

“Compared to the preceding quarter ended April 30, 2010, the group registered a decrease in revenue and pre-tax profit of 2.7% and 16% respectively. The decrease in revenue was mainly due to lower revenue recorded by Sports Toto and Berjaya Philippines Inc,” it said.

It added that Sports Toto saw its revenue and pre-tax profit decreasing 1.9% and 6.3% quarter-on-quarter respectively due mainly to seasonally higher sales during the Chinese Lunar New Year festive season in February 2010.

In a report dated Sept 15, ECM Libra forecast that lotto revenue, which have less than 10% revenue share, would grow 50% year-on-year (y-o-y), while non-lotto revenue would grow at a tepid 5% y-o-y.

It had a “hold” on the counter with a target price of RM4.53. It also revised its forward-looking EPS to 28 sen for FY11, with a net profit estimate of RM375 million.

ECM Libra also foresees a significant re-rating catalyst going forward.

“BToto and Magnum (77% combined market share) have lobbied the Ministry of Finance to reduce the 4D non-first prizes to exactly offset the 2% hike in pool betting duty. Reducing the 4D first prize will allow illegal operators to wrest market share with higher prizes. If their proposal is approved, we would upgrade our earnings estimates and target price by 10%,” it said.

According to market data, BToto has 11 “buy”, nine “hold” and four “sell” with a consensus target price of RM4.63.

BToto had seen its price fall some 5.5% or 24 sen year-to-date, with an estimated EPS of 29.7 sen. Its trailing 12-month EPS was 25.8 sen, while its estimated PE is 13.84 times. BToto fell two sen to close at RM4.11 with 2.1 million shares done.


Written by Max Koh
This article appeared in The Edge Financial Daily, September 21, 2010.