HLIB Research maintains ‘hold’ on BToto, trims target price to RM2.20 on challenging outlook

KUALA LUMPUR (Aug 19): Hong Leong Investment Bank (HLIB) Research has maintained its “hold” call on Berjaya Sports Toto Bhd (BToto) with a lower target price (TP) of RM2.20, from RM2.24, believing that its near-term operations will likely remain challenging given the ongoing Covid-19 outbreak.

HLIB Research analyst Andrew Lim Ken-Wern noted that the group reported a core net loss of RM43.3 million for the fourth quarter ended June 30, 2020 (4QFY20), from a core net profit of RM48.6 million for the previous quarter, bringing core profit after tax and minority interests (PATMI) for the financial year ended June 30, 2020 (FY20) to RM125.7 million.

This formed 85% and 73% of the research house’s and the consensus full-year forecasts respectively, he wrote in a research note today.

“The result disappointment was largely due to lower-than-expected contributions from the Sports Toto operation since its resumption in mid-June, coupled with larger-than-expected losses from the UK business.

“We arrive at our core PATMI sum by excluding the gain on disposal of an investment property (RM8.6 million),” he said.

Lim also gathered that ticket sales are hovering at about 75% of pre-Covid-19 levels since the resumption of operations in mid-June.

“Note that this could be attributed to the overall economic impact of Covid-19 and a potential shift in preference towards the illicit market which operated during the MCO (movement control order) period.

“The foreign operations are also undergoing challenges whereby the UK car dealership business is carrying out appointment-only customer visits, while PGMC’s (Phillipine Gaming Management Corp) bid in the Philippines remains on hold. As such, its operations will likely remain challenging in the near term but we remain hopeful for 2HFY21 (the second half of the financial year ending June 30, 2021) to normalise to pre-Covid levels,” said the analyst.

HLIB Research thus tweaked its FY21/FY22 earnings forecasts by -17.6%/-7.1% respectively as the research house took a conservative stance and imputed lower sales volumes for both the gaming operations and the motor dealership segment in the near term due to the Covid-19 outbreak.

“We also lower our FY21 dividend forecast to 14 sen (from 16 sen) given the ongoing impact of the outbreak on all its operations,” he added.

At 9.47am, shares in BToto were 1.44% or three sen higher at RM2.12, bringing its market value to RM2.8 billion. It saw some 142,700 shares traded.

Source: TheEdgeMarkets