Friday, September 20, 2013

Berjaya Sports Toto: Rewarding shareholders (DBSV)

Berjaya Sports Toto
BUY RM4.10
KLCI : 1,792.91
(Upgrade from Hold)
Price Target : 12- month RM5.00 (Prev RM 4.30)

Rewarding shareholders
• More details on STMT spin-off: special DPS revised to 12- 15sen + dividend-in-specie of STMT units
• STMT offers attractive 8% yield from resilient NFO earnings; easier entry via BST given low 12% free-float
• Upgrade BST to Buy, SOP-based TP raised to RM5.00

What has changed? BST will be reducing its STM-Trust (STMT) units on offer to 190m from 540m, in order to increase distribution-in-specie of STMT units to shareholders post-secondary listing in Malaysia (new business trust regulation is already in place). This would increase BST’s stake in STMT to 86.5% (from 80%) and reduce the free-float to 12% (from 20%). As a result, sale proceeds will decrease to RM236m from RM667m, leading to lower potential special DPS of 12-15sen (from 45sen) – payable in Dec post-STMT listing slated for Nov. BST will distribute 58% of its STM-Trust stake (21-for-10 ratio, after the 6- month moratorium period ie in 3Q2014), while retaining a 28.4% strategic stake (to protect its position as Trust Manager). No change to RM6bn valuation for BST’s Malaysia NFO operations.

Attractive yield from resilient earnings. STMT will be the second largest listed business trust in Singapore with ~US$2bn market cap. We estimate FY15F distribution yield at 7.8% (based on 50 Scent minimum offer price) - comparable to peers’ 8-10% and higher than SREIT’s 6.7%. There could be upside to DPU should STMT gear up in future (net cash post-listing). STMT offers exposure to the largest NFO operator in Malaysia with 42% market share (vs Magnum’s 34%).

Upgrade to Buy (from Hold), raise SOP-based TP to RM5.00 (from RM4.30). We have revised our earnings and SOP to factor in STMT’s listing given clearer visibility. We cut FY14-16F earnings by 5.5-13.5% to factor in lower share of the Malaysian NFO operations (currently 100% owned), but raise STMT payout to 100% (vs BST’s 75% dividend policy). However post-distribution-in-specie, BST risks being overlooked as a mere holding company with much lower earnings (c. RM120m from 28% stake in STMT, STMT management fees & Berjaya Philippines where the NFO concession is expiring in 2015) as investors will likely prefer to invest directly into STMT. While risk of a gaming tax hike is high in the upcoming 2014 Budget (pool betting duty was last raised in Jun 2010 from 6% to 8%), this many be mitigated by lowering prize payout/increasing number of draws as seen previously.

Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 20/09/13

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