May 13, 2010

BJCORP - AmResearch ups BCorp fair value to RM2.15

Stock Name: BJCORP
Company Name: BERJAYA CORPORATION BHD
Research House: AMMB

KUALA LUMPUR: AmResearch Sdn Bhd has reaffirmed its trading buy rating on Berjaya Corp at RM1.54 and raised its fair value to RM2.15 (from RM1.80 previously) after the company announced on Wednesday,May 12 the acquisition of a 70% stake in Ascot Sports (Ascot) from its chairman Tan Sri Vincent Tan for RM525 million cash.

Ascot has been given the exclusive approval to operate sports betting.

The research house said the acquisition was pegged to an attractive PE of six times, based on a minimum profit guarantee of RM375 million over three years, or an average of RM125 million per annum.

BCorp will retain RM125 million plus a top up of RM62.5 million in acceptable securities from Tan as collateral for the guarantee.

AmResearch said BCorp expects to roll out sports betting in August 2010, coinciding with the start of the English Premier League's new season. Distribution will be via 220 B-Toto's outlets and tele-betting. Internet betting will not be permitted.

This lucrative sports betting deal should provide a kick to BCorp's share price on several counts, it said.

"Market potential is very significant. As a guide, sports betting sales in Hong Kong and Singapore have been growing by a robust CAGR of 19% and 21% over the last five years to RM15.4 billion and RM11.7 billion; respectively.

"We expect sports betting sales to surpass industry NFO sales of RM8 billion within the next 10 years," it said.

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