Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD
Gaming
Maintain overweight: Punters' reception of Berjaya Sports Toto's (BST) 4D Toto Jackpot has yielded pleasant surprises. While the game's revenues are rising, it has not cannibalised BST's other lotto games, even Magnum 4D Jackpot. This suggests under-penetration of the numbers forecast operator (NFO) industry. Our sole call for the NFOs is a 'buy' on BST with a discounted cash flow-based target price of RM4.95. Multi-Purpose Holdings Bhd (not rated) makes for a good trading idea at current prices.
Since its introduction on June 11, 2011, BST's 4D Toto Jackpot revenue per draw per outlet has ranged from RM22,000 to RM28,000, doubling BST's total lotto revenue per draw per outlet to RM41,000 to RM48,000, above our forecast. As expected, 4D Toto Jackpot has been more popular than BST's three other lotto games due to its highest probability of being struck at 1 in 16.7 million and the ease of picking forecast numbers.
That said, the 4D Toto Jackpot game has yet to catch up with Magnum 4D Jackpot which is still recording higher revenue per draw per outlet of some RM55,000 post introduction of 4D Toto Jackpot. At the same time, BST's other lotto games have held their ground at revenue per draw per outlet of RM2,000 due to the substantial jackpots they currently offer.
Magnum 4D Jackpot's resilience suggests that the NFO industry is under-penetrated. In fact, total gross NFO revenue as a percentage of nominal GDP is at an all time low of 1.2%. This suggests that the possible introduction of a 4D Jackpot game at Da Ma Cai (under Tanjong plc) is likely to expand the NFO pie rather than cannibalise the other NFOs, a major boost.
With the 4D Toto Jackpot, we expect BST to regain the three percentage points of market share it lost to Magnum beginning late 2009. That said, we do not expect Magnum's absolute revenues to suffer but grow in tandem with the NFO industry. Again without a jackpot game, we expect Da Ma Cai to continue losing market share.
We recommend exposure to the NFO industry as it is recession resistant, amid external economic uncertainties. 4D Toto Jackpot will not only lift BST's lotto revenue but non-lotto revenue as well, especially 4D. In our view, Multi-Purpose will make for a good trading idea if it disposes of its non-core assets and transforms into a pure NFO.
Its current price implies that only Magnum Corp is accounted for, but not the other businesses. ' Maybank IB Research, July 5
This article appeared in The Edge Financial Daily, July 6, 2011.
Company Name: BERJAYA SPORTS TOTO BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 4.95 |
Gaming
Maintain overweight: Punters' reception of Berjaya Sports Toto's (BST) 4D Toto Jackpot has yielded pleasant surprises. While the game's revenues are rising, it has not cannibalised BST's other lotto games, even Magnum 4D Jackpot. This suggests under-penetration of the numbers forecast operator (NFO) industry. Our sole call for the NFOs is a 'buy' on BST with a discounted cash flow-based target price of RM4.95. Multi-Purpose Holdings Bhd (not rated) makes for a good trading idea at current prices.
Since its introduction on June 11, 2011, BST's 4D Toto Jackpot revenue per draw per outlet has ranged from RM22,000 to RM28,000, doubling BST's total lotto revenue per draw per outlet to RM41,000 to RM48,000, above our forecast. As expected, 4D Toto Jackpot has been more popular than BST's three other lotto games due to its highest probability of being struck at 1 in 16.7 million and the ease of picking forecast numbers.
That said, the 4D Toto Jackpot game has yet to catch up with Magnum 4D Jackpot which is still recording higher revenue per draw per outlet of some RM55,000 post introduction of 4D Toto Jackpot. At the same time, BST's other lotto games have held their ground at revenue per draw per outlet of RM2,000 due to the substantial jackpots they currently offer.
Magnum 4D Jackpot's resilience suggests that the NFO industry is under-penetrated. In fact, total gross NFO revenue as a percentage of nominal GDP is at an all time low of 1.2%. This suggests that the possible introduction of a 4D Jackpot game at Da Ma Cai (under Tanjong plc) is likely to expand the NFO pie rather than cannibalise the other NFOs, a major boost.
With the 4D Toto Jackpot, we expect BST to regain the three percentage points of market share it lost to Magnum beginning late 2009. That said, we do not expect Magnum's absolute revenues to suffer but grow in tandem with the NFO industry. Again without a jackpot game, we expect Da Ma Cai to continue losing market share.
We recommend exposure to the NFO industry as it is recession resistant, amid external economic uncertainties. 4D Toto Jackpot will not only lift BST's lotto revenue but non-lotto revenue as well, especially 4D. In our view, Multi-Purpose will make for a good trading idea if it disposes of its non-core assets and transforms into a pure NFO.
Its current price implies that only Magnum Corp is accounted for, but not the other businesses. ' Maybank IB Research, July 5
This article appeared in The Edge Financial Daily, July 6, 2011.
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