KUALA LUMPUR: Berjaya Sports Toto Bhd’s (BToto) net profit was significantly lower at RM235 million in its year ended June 30 2019, due to the write-down of its investment value of its recently-disposed subsidiary Philippine Gaming Management Corp (PGMC), Affin Hwang Capital said.
Revenue wise, the figure for the year came at RM974.92 million, which Affin Hwang said was mainly contributed by sales from the number forecast operator (NFO) business at Sports Toto Malaysia Sdn Bhd and the auto retailing business operated by HR Owen plc.
The research house remained sceptical on the sustainability of the gambling sector, which could fizzle out once enforcement activity starts to normalise, despite the government’s efforts to combat illegal gambling.
“Nevertheless, there could be upside risk to our earnings forecast should BToto be able to sustain the current momentum, as we forecast an average revenue per draw day of about RM18.2 million for the financial year ending June 30, 2020 (FY2020).”
With the disposal and dilution of its stake in Philippines Leasing (PGMC) to a local partner, BToto’s effective stake has been reduced from 88.3 per cent to 35.3 per cent.
Affin Hwang said although PGMC contributed about 12 per cent of profit in the 14 months of FY19, the leasing contract with Philippines Charity Sweepstake Office (PCSO) was coming to an end.
“With the new partner, PGMC was one of only two bidders for the new five-year lease, but PGMC was declared the only bid that was eligible for evaluation and approval.
“PCSO is currently evaluating PGMC’s financial bid. We believe the rates would be significantly lower than current rates, but would cover three regions (Luzon, Visayas and Midanao) instead of Luzion only.”
The firm reiterated its “sell” call with a target price of RM2.10 per share for BToto, while incorporating the disposal of its Philippines leasing business.
“We are trimming our earnings per share by 3.7 per cent to 4.7 per cent for FY2020 and FY2021. However, we are keeping our 12-month target price unchanged at RM2.10.”
Among the key upside risks to its call are enhanced enforcement activity on illegal betting operators and an increase in the number of draw days.