Berjaya Sport Toto Bhd (BST MK, FV: RM4.72, Close: RM4.40)

Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD

Research House: OSK

Price Call: BUY

Target Price: 4.72

BToto's annualized 9MFY12 numbers were largely within ourand consensus expectations. Its relatively stable and defensive earnings aswell as  the strong likelihood  of dividends surprising on the upside make the stock ideal  to hold under the current volatile environment.  The share price is supported by a net dividendyield of 6.4%,  which may  potentially rise to 7.3%, assuming a 100% payout ratio. Maintain BUY, with anunchanged fair value of RM4.72.

In line.  BToto's annualized  9MFY12 earnings was spot on with ourestimates, making up 100.2% of our full-year forecast and largely in line withconsensus, meeting 104.2% of  the  full-year forecast. We expect a slightmoderation in sequential revenue performance as the current quarter's strongresults  are skewed by the  festive effect arising from the Chinese NewYear (CNY). The group reported a 9MFY12 revenue and earnings growth of 6.3% and27.3% respectively. The stronger earnings vs revenue growth was attributed to alower prize payout ratio and finance costs. Revenue growth was driven by thefact that  CNY fell in the month ofJanuary  this year (during the  3Q period) vs February in 2011 (the 4Qperiod).

Higher dividends onthe cards? The group declared a third interim single-tier DPS of 6 sen,bringing  its  9MFY12 DPS to 22 sen (vs 18 sen in 1HFY11).This represents a payout ratio of 94%, beating  our forecast  for an 88% full-year payout ratio. Given the seasonal moderation in 4Qearnings, we are maintaining our full-year dividend estimates. We expect anidentical final quarter DPS of 6 sen per share, which would bring the full-yearDPS close to our full-year estimate of 28 sen/share, representing a net dividendyield of 6.4%.

Maintain BUY.Given its defensive earnings and solid dividend track record, we are maintainingour BUY recommendation  and fair value ofRM4.72. The stock's  net dividend yieldof 6.4% on our relatively conservative dividend payout assumption of 88% vs YTDpayout ratio of 94%, coupled with its defensive earnings, make BToto an ideal investment,especially in view of the volatile and uncertain market conditions of late.

Source: OSK188