BERJAYA SPORTS TOTO

• FROM ECM LIBRA
  Berjaya Sports Toto
  (RM4.20 BST MK)
  2QFY10: Earnings growth stalls GAMING
• · Below expectations
  BST’s 6MFY10 results were generally below expectations. Revenue came
  in at 42% and 44% of full-year house and street estimates respectively,
  while net profit stood at 44% and 46% respectively.
• · 6MFY10 revenue –4.8% y-o-y, net profit -1.5%
  BST’s 6MFY10 revenue declined due to the benefit of strong sales from
  high jackpot in the Mega Toto 6/52 game in 2QFY09. The decline in
  revenue was offset by improved revenue from Prime Gaming Philippines
  Inc.
  Net profit saw a smaller drop than revenue mainly due to lower prize
  payout.
  On a more positive note, there has been sequential improvement in
  revenue and earnings.
• · No dividends declared
  No dividends were declared by BST for the quarter.
  
• · Maintain BUY, TP revised to RM5.30
  We reiterate our BUY call, while our DCF-derived (WACC: 7.5%, g: 2%)
  target price is revised from RM5.80 to RM5.30 as we cut our earnings
  forecast by 7-15%. While BST will benefit in 3QFY10 from the introduction
  of its new game Power Toto 6/55, we are wary of the risks posed by
  Magnum’s 4D Jackpot which has received good response while eroding
  some of BST’s market share. Nonetheless, we expect 2HFY10 to be
  stronger due to Chinese New Year festivities. Risks include (1)
  intensifying competition from alternative jackpot games (2) higher than
  expected prize payout and (3) lower than expected dividend payout ratio.