Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD
Research House: CIMB
Berjaya Sports Toto Bhd (BToto)
(March 12, RM4.36)
Maintain outperform at RM4.41, target price at RM5.45: BToto announced last Thursday that it had obtained the necessary approvals to replace its Super Toto 6/49 with a new lotto variant - Supreme Toto 6/58. Supreme Toto is based on a RM2 per bet and offers a guaranteed minimum upfront jackpot of RM8.88 million, the highest in town.
BToto will be launching this new lotto game on March 18, 2010.
This latest news is just a mild surprise for us as it is not the first time that BToto has successfully negotiated for a replacement game. Notably, in June 2009, the number forecast operator announced the replacement of the Toto 6/42 Jackpot with Power Toto 6/55.
Before that, it replaced Toto 4/49 with the Mega 6/52 Jackpot game in June 2007. Although BToto will still be offering three lotto games, we believe that Supreme Toto 6/58 is a replacement for the better as it should appeal more to the average punter given its attractive jackpot prize in excess of RM8 million, which is the highest in town.
Comparatively, the jackpot for the outgoing Super Toto 6/49 starts from RM1 million. The higher jackpot should help BToto's sales given the strong correlation between jackpot sizes and ticket sales.
Besides its much higher minimum jackpot offering and larger number matrix, Supreme Toto also stands out from BToto's two other lotto variants in its minimum bet of RM2 which is higher than the RM1 minimum for Mega Toto 6/52 and Power Toto 6/55.
With the addition of Supreme Toto, all of BToto's lotto games now boast top-heavy payout structures and no ceiling on the jackpot. This differs from the outgoing 6/49 variant whose prize money feeds into two running jackpots (1st prize and 2nd prize).
We note that top-heavy payout structures usually result in a faster jackpot snowballing, which should also propel buying interest. From a payout perspective, we expect Supreme Toto's payout to mirror the payout of about 55% for its lotto peers.
We are positive about this replacement game as its attractive jackpot provides a good platform to propel lotto revenue growth. We see this replacement game as BToto's retaliation against Magnum's 4D Jackpot game, which has been generating strong sales given its above RM20 million jackpot offering.
BToto's new game should help to arrest any shift in market share to Magnum.
Given the minimal earnings adjustments, we retain our financial years ending April 2010 to 2012 dividend per share forecasts as we stick to our 76% to 78% payout ratio. As such, our end-calendar year 2010 dividend discount model-based target price stays at RM5.45.
BToto remains an outperform. We reiterate our outperform call on BToto, with the potential share price catalysts being this announcement of a new lotto game variant, and less-than-expected cannibalisation from Magnum's 4D Jackpot game. - CIMB Research, March 12
This article appeared in The Edge Financial Daily, March 15, 2010.
Company Name: BERJAYA SPORTS TOTO BHD
Research House: CIMB
Berjaya Sports Toto Bhd (BToto)
(March 12, RM4.36)
Maintain outperform at RM4.41, target price at RM5.45: BToto announced last Thursday that it had obtained the necessary approvals to replace its Super Toto 6/49 with a new lotto variant - Supreme Toto 6/58. Supreme Toto is based on a RM2 per bet and offers a guaranteed minimum upfront jackpot of RM8.88 million, the highest in town.
BToto will be launching this new lotto game on March 18, 2010.
This latest news is just a mild surprise for us as it is not the first time that BToto has successfully negotiated for a replacement game. Notably, in June 2009, the number forecast operator announced the replacement of the Toto 6/42 Jackpot with Power Toto 6/55.
Before that, it replaced Toto 4/49 with the Mega 6/52 Jackpot game in June 2007. Although BToto will still be offering three lotto games, we believe that Supreme Toto 6/58 is a replacement for the better as it should appeal more to the average punter given its attractive jackpot prize in excess of RM8 million, which is the highest in town.
Comparatively, the jackpot for the outgoing Super Toto 6/49 starts from RM1 million. The higher jackpot should help BToto's sales given the strong correlation between jackpot sizes and ticket sales.
Besides its much higher minimum jackpot offering and larger number matrix, Supreme Toto also stands out from BToto's two other lotto variants in its minimum bet of RM2 which is higher than the RM1 minimum for Mega Toto 6/52 and Power Toto 6/55.
With the addition of Supreme Toto, all of BToto's lotto games now boast top-heavy payout structures and no ceiling on the jackpot. This differs from the outgoing 6/49 variant whose prize money feeds into two running jackpots (1st prize and 2nd prize).
We note that top-heavy payout structures usually result in a faster jackpot snowballing, which should also propel buying interest. From a payout perspective, we expect Supreme Toto's payout to mirror the payout of about 55% for its lotto peers.
We are positive about this replacement game as its attractive jackpot provides a good platform to propel lotto revenue growth. We see this replacement game as BToto's retaliation against Magnum's 4D Jackpot game, which has been generating strong sales given its above RM20 million jackpot offering.
BToto's new game should help to arrest any shift in market share to Magnum.
Given the minimal earnings adjustments, we retain our financial years ending April 2010 to 2012 dividend per share forecasts as we stick to our 76% to 78% payout ratio. As such, our end-calendar year 2010 dividend discount model-based target price stays at RM5.45.
BToto remains an outperform. We reiterate our outperform call on BToto, with the potential share price catalysts being this announcement of a new lotto game variant, and less-than-expected cannibalisation from Magnum's 4D Jackpot game. - CIMB Research, March 12
This article appeared in The Edge Financial Daily, March 15, 2010.
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