BToto: Numbers bode well for dividend

BToto: Numbers bode well for dividend
Written by Insider Asia
Wednesday, 06 July 2011 11:48

Berjaya Sports Toto may have disappointed the market slightly when it announced a lower-than-expected dividend for the financial year ended April 2011. The gaming company is among the higher yielding stocks on the local bourse, a characteristic that has appealed to investors, especially in times of market uncertainty.

Indeed, high-yielding stocks, including real estate investment trusts (REITs), may be fairly good investments at this point with bank deposit rates staying near the lower end of their historical range and concern over slowing global economic growth dampening sentiment for the broader market.

Berjaya Sports Toto declared a final dividend of three sen per share in conjunction with its 4QFY11 earnings results. That brings total dividend for the year to 21 sen per share, compared with 25.2 sen for FY09 and 27 sen per share for FY10. At the current share price of RM4.43, shareholders will earn a net yield of 4.7%, still decent though not quite up to expectations. The stock will trade ex-entitlement for the final dividend on July 8.

On a positive note, the company’s gearing improved to 22% as at end-April 2011 with net debt totalling RM98.9 million, down from 40% in the previous financial year. The strengthening of its balance sheet should pave the way for higher dividends going forward, especially on the back of expectations of better earnings.

The company’s earnings for 1HFY11 were hurt by the increase in pool betting duties from 6% to 8% in June 2010. Net profit fell by more than 36% year-on-year for the first six months of its financial year. The negative impact was offset by the subsequent reduction in prize payout from RM200 to




RM100 for the 4D Big special prize in December 2010. Earnings recovered smartly, net profit was up a strong 21% y-o-y in 2HFY11. Nevertheless, net profit for the full-year was still down by some 9% at RM348.1 million.

The double-digit earnings recovery should continue into 1HFY12, given the low base effect, before tapering off in the second half of the financial year. Overall, we estimate net profit will expand to roughly RM406 million.

Dividends should rise in line with the higher earnings. Total dividend payout for FY11 was equivalent to about 82% of net profit. Assuming a similar payout level, dividends should total some 25 sen per share. That would raise investors’ net yield to a more attractive 5.6%.

Its valuations too appear fairly decent, estimated at roughly 14.6 times our estimated forward earnings. Indeed, its prices and yields compare quite well with the usual suspects for historically high yields.

The company recently launched a new 4D Jackpot game, previously offered only by rival Magnum, which has seen positive response from the gaming public. Market observers believe the new game is a much needed boost for the company to protect its market share, which has declined over the past two years.

Nevertheless, growth prospects for its underlying gaming business are expected to remain somewhat pedestrian. Turnover growth is expected to be in single digits. Thus we suspect its relatively high yields will continue to be the stock’s main draw, and should provide good floor support to Berjaya Sports Toto’s share price.


Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.


This article appeared in The Edge Financial Daily, July 6, 2011.
Nice article to read and share as I owned some BJ Toto, may be times to relook at the fundamentals and buying in some more ?