BJTOTO / 1562 - 2010 Q3

BERJAYA SPORTS TOTO BERHAD

Listing Date: 04.05.1972
Market: MAIN
Sector: TRADING/SERVICES
Par Value: 0.10
Major Industry: Recreation
Sub Industry: Miscellaneous Recreation

Berjaya Sports Toto Berhad (BToto) is principally engaged in investment holding and provision of management services to its subsidiary companies. The Company, along with its subsidiaries, is principally engaged in the operations of Toto betting; leasing of online lottery equipment; manufacture and distribution of computerized lottery and voting systems; property investment and development, and investment holding. The Company operates in two segments: toto betting and leasing of lottery equipment, and others, which includes property investment and development, investment holding, and manufacture and distribution of computerized lottery and voting systems. On September 5, 2008, the Company incorporated a wholly owned subsidiary, Berjaya-ILTS Limited. In May 2009, the Company, through its subsidiary Berjaya Sports Toto (Cayman) Limited (BSTC), acquired 6.81% interest in Prime Gaming Philippines, Inc.

OSK Research TP: 4.9 (12 March 2010)
My TP: 4.08+0.3(DPS) = 4.38 (PE 14, eps 0.2916)
My Decision: NOT BUY
Reason: Revenue drop, new game not sure it revenue, give share dividend (no cash until sold)

My opinion based on 2010 Q3 report (number in '000):
- Decrease in revenue and pre-tax profit mainly due to the results of Sports Toto Malaysia Sdn Bhd ("Sports Toto") as explained in the ensuing paragraph coupled with higher finance cost
incurred, while Prime Gaming Philippines, Inc. registered an increase in revenue of 1.9% but reported a drop in pre-tax profit of 13.2%
- Previous year had benefited from the traditionally high Chinese Lunar New Year festive sales in the month of January coupled with the strong sales from high jackpots in the Mega 6/52 game. The lower drop in pre-tax profit as compared to the decrease in revenue was mainly due to the lower prize payout in the current Q
- 30.5 share dividend approved for financial year ending 30 April 2010
- Estimate next 4Q eps after 2010 Q3 result announced = 0.0729*4 = 0.2916, estimate PE on current price 4.37 = 13.94(DPS 0.305)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.0762*4 = 0.3048, estimate highest/lowest PE = 13.65/12.53 (DPS 0.29)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.0797*4 = 0.3188, estimate highest/lowest PE = 12.21/12.08 (DPS 0.29)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.0854*4 = 0.3416, but this is too high, so use last 3 years average eps = (0.3268+0.276+0.2905)/3 = 0.2978, estimate highest/lowest PE = 16.66/13.26 (DPS 0.29)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.0773*4 = 0.3092, estimate highest/lowest PE = 15.33/13.97 (DPS 0.26)