Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD
Research House: ECMLIBRA
Berjaya Sports Toto Bhd (BToto)
(March 26, RM4.44)
Maintain buy at RM4.42 with target price of RM4.91: BToto's new lotto game, Supreme Toto 6/58 (6/58) recorded average revenue per draw of approximately RM800,000 since it was launched three draws ago on March 20, with a maiden jackpot of RM10.9 million. This was within expectations as Mega Toto 6/52 (6/52) and Super Toto 6/49 (6/49) recorded similar revenue per draw when their jackpot was approximately RM10 million.
Since 6/58 was launched, BToto recorded average lotto revenue per draw of RM1.5 million. The incremental average lotto revenue per draw was approximately RM500,000 (6/58 average revenue per draw of RM800,000 less discontinued 6/49 average revenue per draw of RM300,000) or some 30% higher. Lotto revenue per draw will trend higher as the last total jackpot offered was only RM18 million when the total minimum jackpot is RM13.9 million. This is especially so when the jackpots snowball to levels way higher than the minimum.
Lotto revenue comprised only 7% and 10% of FY08 and FY09 gross number forecast operation (NFO) revenue and grew RM132.4 million year-on-year (y-o-y) but was outpaced by non-lotto revenue which grew RM321.9 million y-o-y or two and a half times more.
Increased visits to outlets driven by large jackpots also resulted in higher non-lotto sales. With larger jackpots going forward due to the high 6/58 minimum jackpot of RM8.9 million, we foresee non-lotto revenue growth as well. With the competing Magnum 4D Jackpot being struck on Sunday, this will only help BToto's cause.
We maintain buy and RM4.91 target price. As only three draws have passed, we leave our earnings estimates unchanged for now. Our RM4.91 target price is premised on end-financial year ending April 30, 2011 (FY11) discounted cash flow, utilising 7.9% weighted average cost of capital and 1.5% terminal growth rate.
We forecast that investors will also receive 27 sen single-tier dividend per share (DPS) (fourth quarter of FY10: four sen single tier, FY11: 23 sen single tier) between now and end-FY11 translating into 17% upside potential. With 681 outlets (Magnum: 485, Da Ma Cai: 343), BToto is the single-largest NFO operator in Malaysia and is well poised to secure the sports betting licence. - ECM Libra Investment Research, March 26
This article appeared in The Edge Financial Daily, March 29, 2010.
Company Name: BERJAYA SPORTS TOTO BHD
Research House: ECMLIBRA
Berjaya Sports Toto Bhd (BToto)
(March 26, RM4.44)
Maintain buy at RM4.42 with target price of RM4.91: BToto's new lotto game, Supreme Toto 6/58 (6/58) recorded average revenue per draw of approximately RM800,000 since it was launched three draws ago on March 20, with a maiden jackpot of RM10.9 million. This was within expectations as Mega Toto 6/52 (6/52) and Super Toto 6/49 (6/49) recorded similar revenue per draw when their jackpot was approximately RM10 million.
Since 6/58 was launched, BToto recorded average lotto revenue per draw of RM1.5 million. The incremental average lotto revenue per draw was approximately RM500,000 (6/58 average revenue per draw of RM800,000 less discontinued 6/49 average revenue per draw of RM300,000) or some 30% higher. Lotto revenue per draw will trend higher as the last total jackpot offered was only RM18 million when the total minimum jackpot is RM13.9 million. This is especially so when the jackpots snowball to levels way higher than the minimum.
Lotto revenue comprised only 7% and 10% of FY08 and FY09 gross number forecast operation (NFO) revenue and grew RM132.4 million year-on-year (y-o-y) but was outpaced by non-lotto revenue which grew RM321.9 million y-o-y or two and a half times more.
Increased visits to outlets driven by large jackpots also resulted in higher non-lotto sales. With larger jackpots going forward due to the high 6/58 minimum jackpot of RM8.9 million, we foresee non-lotto revenue growth as well. With the competing Magnum 4D Jackpot being struck on Sunday, this will only help BToto's cause.
We maintain buy and RM4.91 target price. As only three draws have passed, we leave our earnings estimates unchanged for now. Our RM4.91 target price is premised on end-financial year ending April 30, 2011 (FY11) discounted cash flow, utilising 7.9% weighted average cost of capital and 1.5% terminal growth rate.
We forecast that investors will also receive 27 sen single-tier dividend per share (DPS) (fourth quarter of FY10: four sen single tier, FY11: 23 sen single tier) between now and end-FY11 translating into 17% upside potential. With 681 outlets (Magnum: 485, Da Ma Cai: 343), BToto is the single-largest NFO operator in Malaysia and is well poised to secure the sports betting licence. - ECM Libra Investment Research, March 26
This article appeared in The Edge Financial Daily, March 29, 2010.
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