Berjaya Sports Toto - To acquire stake in PCSO? HOLD

Stock Name: BJTOTO
Company Name: BERJAYA SPORTS TOTO BHD

Research House: AMMB

Price Call: HOLD

Target Price: 4.70

- According to news reports, Berjaya Sports Toto Bhd (BToto)may be acquiring a stake in the Philippine Charity Sweepstakes Office(PCSO). 

- Currently, BToto supplies and maintains a computerisedonline lottery system and provides software support to PCSO. 

- As at end-April 2011, PCSO had 2,633 outlets in Luzonversus 2,398 outlets in the preceding year. 

- The NFO industry in the Philippines is more liberalcompared to Malaysia. It is easier to increase the number of outlets andfrequency of draws in the Philippines compared to Malaysia. 

- There are as many three draws a day for some of thelottery games in the Philippines compared to Malaysia's three draws a weekpresently (excluding special draws).  

- We view the potential acquisition of PCSO positivelyalthough there are no financial details or pricing on the acquisition yet.  

- Presently, BToto's operations in the Philippines areestimated to account for 20% to 25% of group operating profit. BerjayaPhilippines recorded a revenue of Peso 2 billion (RM141mil) and pre-tax profitof Peso 1.33 billion (RM73mil) in FY11.

- Apart from lottery-related operations, BToto also operatesa hotel called Berjaya Manila Hotel in Makati City.  

- The hotel recorded revenue of Peso 112.2mil (RM8mil) andpre-tax profit of Peso 6.1mil (RM432,680) in FY11.  

- We maintain a HOLD on BToto with a DCF-based fair value ofRM4.70/share. BToto's dividend yield is decent, forecast at 6.9% for FY12F and7.1% for FY13F.   

Source: AmeSecurities