PP 7767/09/2010(025354)

21 June 2010

Malaysia Corporate Highlights

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

R e su l ts N o t e
21 June
21 June
20102010
MARKET DATELINE

Berjaya Sports Toto Share Price

Fair Value
:
:
RM4.43
RM5.05
Higher Dividend Payout, Weaker Luck Factor 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) 15.3 - 13.3 NM 85.5 41.9 6.1
2011f 3,445.6 435.9 32.3 11.7 13.7 33.0 18.0 NM 119.2 65.5 5.9
2012f 3,470.0 457.0 33.8 4.9 13.1 34.0 17.9 NM 104.9 67.3 6.3
2013f 3,574.6 469.3 34.7 2.7 12.8 - 15.5 (85.7) 91.3 61.9 6.5
Main Market Listing / Non-Trustee Stock / Non Syariah-Approved Stock By The SC * Consensus Based On IBES
E i
RHBRI Vs. Consensus
Affected by weaker luck factor BTotos FY04/10 net profit was below Above
our and consensus expectations, accounting for 92-93% of forecasts. This In Line
was due to the higher-than-expected gross payout ratio of 66.7% recorded Below
in 4Q10 caused by weaker luck factor, which caused YTDFY04/10 payout
ratio to rise to 63.9% (from 63% in 9MFY10 and theoretical level of 63%). Issued Capital (m shares) 1,351.0

which raised prize payout ratios above theoretical level. FY10

Market Cap (RMm)
Daily Trading Vol (m shs)
5,985.1
1.0
revenue fell 8.2% yoy, caused by an 8.3% yoy drop in gaming revenue (-
52wk Price Range (RM) 4.11-4.99
6.0% yoy decline for its 4D and 30.8% yoy decline for Lotto), despite ten
Major Shareholders: (%)
additional draw days during the period, due mainly to the 13.3% yoy Berjaya Land 48.0
decline in sales per draw (-11.2% yoy for 4D and -34% yoy for Lotto), as Tan Sri Vincent Tan 5.6
competition from Magnum remained intense. Net profit, however, fell by a (direct)
lower 6.2% yoy, due to lower gross prize payout ratio (estimated at 63.9%
vs. 64.5% in FY04/09), higher interest income and lower MI, offset slightly FYE Apr FY11 FY12 FY14
by higher interest expense and higher effective tax rate. EPS chg (%) (0.3) (0.4) -

Surprise higher dividend declared. BToto declared an 8 sen final single Var to Cons (%) (2.2) (0.5) -

tier dividend in 4QFY10 (versus 11 sen tax exempt DPS in 4QFY09). PE Band Chart
Together with the interim net DPS of 19 sen declared in 1QFY10, this
PER = 16x
would translate to a net payout of 93.3%, significantly higher than our PER = 13x
assumption and management guidance of 75% net payout. The total PER = 10x

dividend of 27 sen DPS translates to a net yield of 6.1% for FY10. Note
also that this does not include the treasury share distribution which was
equivalent to 30.5 sen net dividend in July 09.
Risks. Main risks for BToto include: 1) Poor luck factor causing high prize
payout ratios; 2) Regulatory changes for NFO industry to discourage
gambling in the country or to allow competitors more outlets and more
Relative Performance To FBM KLCI
game variations; and 3) Hike in gaming taxes.
Forecasts. We maintain our assumptions of a recovery in sales per draw FBM KLCI

of +7% in FY11 (from -13.3% in FY10) and +3% in FY12, as we believe

prospects are improving, as can be seen by the 2.3% qoq increase in sales
per draw in 4QFY10. Additionally, note that we have not taken into account Berjaya Sport Toto

any potential positive impact of BTotos new Supreme 6/58 game into our
forecasts yet, as we continue to monitor its popularity. We have, however,
raised our net dividend payout assumptions to 80-83% (from 75%), as we
believe the company is now in a more comfortable cashflow position to pay
out more dividends in the future, although we note that this is still far
below BTotos historical payout of 90->100%. As such, we tweak our
forecasts down by 0.3-0.5% for FY11-12 and introduce our FY13 forecasts.
Investment case. Post-earnings revision and after rolling forward our Hoe Lee Leng
DCF-based valuation, we raise our fair value slightly to RM5.05 (from (603) 92802184
RM4.95) and maintain our Outperform recommendation. hoe.lee.leng@rhb.com.my

Please read important disclosures at the end of this report. Page 1 of 3

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 21 June 2010

Table 2. BToto Quarterly Results

QoQ YoY YoY
FYE Apr (RMm) 4Q09 3Q10 4Q10 FY09 FY10 Comments
(%) (%) (%)
Turnover 870.3 850.8 858.3 0.9 (1.4) 3695.7 3392.3 (8.2)
Gaming 866.8 847.7 848.0 0.0 (2.2) 3680.1 3374.1 (8.3) Decline in lotto and 4D games
sales, despite 10 additional
draws in YTDFY10, due to lower
sales per draw caused by
overlapping special draw days
Others 3.5 3.1 10.3 237.0 195.6 15.6 18.2 16.8
EBIT 154.8 145.3 121.0 (16.7) (21.8) 598.0 562.1 (6.0)
Gaming 160.2 151.9 121.5 (20.0) (24.2) 615.8 585.1 (5.0) Improved margin yoy due to
better luck factor, but lower
margin qoq due to weaker luck
factor
Others (5.4) (6.6) (0.4) (93.5) (92.0) (17.8) (23.0) 29.1
Investment 0.6 0.5 (0.0) (102.6) (102.3) (3.8) (0.0) (98.9)
Interest income (1.1) 0.7 3.0 325.5 (378.6) 7.2 9.5 32.0
Interest expenses (3.4) (7.3) (6.7) (8.0) 95.1 (16.1) (25.4) 57.6 Due to increased net debt of
RM187.2m (from RM25.8m at
end- FY09) due to debt taken up
to pay special dividend
Assc (0.0) 0.0 0.0 n/a n/a (0.0) 0.0
Exceptional items 0.0 0.0 0.0 n/a n/a 0.0 0.0
Pre-tax profit 150.8 139.3 117.3 (15.8) (22.2) 585.3 546.2 (6.7) Smaller decline vs. sales due to
lower prize payout
Norm pre-tax 150.8 139.3 117.3 (15.8) (22.2) 585.3 546.2 (6.7)
Taxation (41.0) (40.6) (34.3) (15.4) (16.3) (167.1) (159.8) (4.3)
Minority interest (2.6) (0.8) (2.2) 169.8 (14.8) (7.8) (1.3) (82.9)
Net profit 107.2 97.9 80.8 (17.4) (24.7) 410.5 385.0 (6.2) Flow through from PBT and
higher effective tax rate
Norm net profit 107.2 97.9 80.8 (17.4) (24.7) 410.5 385.0 (6.2)
EPS (sen) 8.5 7.3 6.1 (17.0) (29.2) 32.7 28.9 (11.5)
DPS (sen) 11.0 0.0 8.0 29.0 27.0

Margins (%)
EBIT 17.8 17.1 14.1 16.2 16.6
Gaming 18.5 17.9 14.3 16.7 17.3 Due to lower prize payout ratio
Pre-tax 17.3 16.4 13.7 15.8 16.1
Normalised pre-tax 17.3 16.4 13.7 15.8 16.1
Net 12.3 11.5 9.4 11.1 11.3
Normalised net 12.3 11.5 9.4 11.1 11.3
Tax rate (%) 27.2 29.2 29.3 28.5 29.3

Source: Company, RHBRI

Table 3: NFO Sales Trend

FYE Apr (RMm) 4Q09 3Q10 4Q10 % qoq % yoy FY09 FY10 % yoy Comment
Sales (gross) 942.2 921.4 921.7 0.0 (2.2) 4000.1 3667.6 (8.3)
- Super & Jackpot^ 59.0 53.7 55.6 3.6 (5.7) 372.6 257.8 (30.8) Decrease in revenue despite
higher number of draw days due
to lower sales per draw day
- 4D, 5D, 6D & 883.2 867.7 866.1 (0.2) (1.9) 3627.5 3409.7 (6.0) Yoy decline due to lower sales
4/49* per draw, offset slightly by higher
number of draw days

No. of draw days 40.0 45.0 44.0 (2.2) 10.0 166.0 176.0 6.0 Includes 7 special draws in
4QFY10 versus 2 in 4QFY09, and
includes 20 special draw days in
FY10 vs 10 in FY09

Sales per draw day 23.6 20.5 20.9 2.3 (11.1) 96.2 83.4 (13.3)
- Super & Jackpot^ 1.5 1.2 1.3 6.0 (14.3) 8.9 5.9 (34.0) Yoy and QoQ decrease due to
competition from Magnums new
4D jackpot game
- 4D, 5D, 6D & 22.1 19.3 19.7 2.1 (10.9) 87.3 77.5 (11.2) Weaker consumer spending yoy,
4/49* although on qoq basis, sales were
slightly higher

Est payout ratio (%) 62.9 63.4 66.7 5.2 6.1 64.5 63.9 (0.9) Luck factor weakened
significantly in 4QFY10 qoq, but
improved yoy
^ Estimate, * Mostly 4D

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 21 June 2010

Table 4. Earnings Forecasts Table 5. 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
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investors individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the RHB Group) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

Connected Persons means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the Connected Persons are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRIs previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the Connected Persons, including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM 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 FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

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

Industry/Sector Ratings

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

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

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

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.
This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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