PP 7767/09/2010(025354)

28 June 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New s Upda te
28 June 2010
MARKET DATELINE

Berjaya Sports Toto Share Price

Fair Value
:
:
RM4.33
RM5.05
BCorp Aborts Sports Betting Deal Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (BTOTO; Code: 1562) Bloomberg: BST MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
Apr (RMm) (RMm) (sen) (%) (x) (x) (x) (x) (%) (%) (%)
2010 3,392.3 381.7 28.9 (11.6) 15.0 13.0 NM 85.5 41.9 6.2
2011f 3,445.6 435.9 32.3 11.7 13.4 33.0 17.6 NM 119.2 65.5 6.0
2012f 3,470.0 457.0 33.8 4.9 12.8 34.0 17.5 NM 104.9 67.3 6.5
2013f 3,574.6 469.3 34.7 2.7 12.5 15.1 (83.8) 91.3 61.9 6.7
Main Market Listing / Non-Trustee Stock / Non Syariah-Approved Stock By The SC * Consensus Based On IBES
E i

♦ Berjaya Corp aborts sports betting deal. In a press statement, Berjaya Issued Capital (m shares) 1,351.0
Market Cap (RMm) 5,850.0
Corp has aborted its plan to acquire a 70% equity stake in Ascot Sports
Daily Trading Vol (m shs) 1.0
S/B (Ascot) for RM525m from Tan Sri Dato’ Seri Vincent Tan Chee Yioun
52wk Price Range (RM) 4.11-4.99
(TSVT). In the statement, BCorp. stressed that the Government had
Major Shareholders: (%)
backtracked on its decision to issue the licence despite having granted its Berjaya Land 48.0
approval for the reissuance. This statement comes after confirmation from Tan Sri Vincent Tan 5.6
the Government that it will not issue any sports betting licence to Ascot (direct)
Sports.
FYE Apr FY11 FY12 FY13
♦ Disappointing move by the Government. We believe this is another EPS chg (%) - - -
disappointing move by the Government, and could be seen as a sign of Var to Cons (%) (2.2) (0.5) -
weak political will and politicizing of a business decision. Based on a
PE Band Chart
potential market size of RM20bn and a gaming tax rate of 10%, the
Government is set to lose approximately RM2bn worth of revenue per year
PER = 16x
as a result of this decision. PER = 13x
PER = 10x

♦ Impact to BToto minimal, but sentiment would be affected.

Although the impact to BToto’s earnings from this sports betting licence
would have been very minimal at this stage (adding 2-3% to net profits),
given the fact that distribution was to have been divided between retail
outlets and telephone betting; and that the 1% agent commissions would
have to be split further between the agencies and BToto, we believe Relative Performance To FBM KLCI

sentiment on the stock would be affected negatively.

FBM KLCI
♦ Risks. Main risks for BToto include: 1) Poor luck factor causing high prize
payout ratios; 2) Regulatory changes for NFO industry to discourage
Berjaya Sport Toto
gambling in the country or to allow competitors more outlets and more
game variations; and 3) Hike in gaming taxes.

♦ Forecasts unchanged. We maintain our earnings forecasts for BToto as

we had not imputed the sports betting revenue into our forecasts.

♦ Investment case. No change to our Outperform call and our DCF-based

fair value of RM5.05 (WACC 9.8%). Although we expect sentiment to be
negatively affected, we expect this to have a short-term impact on BToto,
given that the earnings impact for BToto would have been minimal and Hoe Lee Leng
that BToto’s core NFO business is still stable. At current valuation levels, (603) 92802184
we believe BToto continues to provide decent dividend yield prospects and hoe.lee.leng@rhb.com.my
is now trading at the lower-end of its 10-year historical PE range of 11-
19x.

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 28 June 2010

Table 2. Earnings Forecasts Table 3. Forecast Assumptions

FYE Apr (RMm) FY10a FY11F FY12F FY13F FYE Apr FY11F FY12F FY13F

Turnover 3392.3 3445.6 3470.0 3574.6 Revenue per draw day (RMm) 21.9 22.1 22.7
Gaming 3374.1 3421.1 3444.3 3547.6 No. draw days 156 156 156
Others 18.2 24.5 25.7 27.0 Gross prize payout ratio (%) 63.0 63.0 63.0
Turnover growth (%) (8.2) 1.6 0.7 3.0 No. of outlets 680 680 680

EBITDA 612.1 628.7 647.8 662.6

Gaming 585.1 648.7 657.8 677.6
Others (23.0) (20.0) (10.0) (15.0)
EBITDA margin (%) 18.0 18.2 18.7 18.5

Depreciation (17.7) (18.0) (18.2) (18.4)

Net Interest (15.9) (25.1) (23.5) (21.8)
Associates (0.0) 0.0 0.0 0.0
EI 0.0 0.0 0.0 0.0

Pretax Profit 546.2 584.3 604.7 621.0

Tax (159.7) (151.9) (151.2) (155.3)
PAT 386.4 432.4 453.5 465.8
Minorities (4.7) 3.5 3.5 3.5
Net Profit 381.7 435.9 457.0 469.3

Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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