Maintain BUY call and DCF-based TP of MYR2.24
Earnings were above our expectations due to H.R. Owen. Thus, we raise
our FY22E/FY23E/FY24E earnings by 52%/5%/5%. That said, H.R. Owen
does not pay dividends to SPTOTO. Thus, our DPS estimates and DCFbased TP are unchanged. Yet, SPTOTO offers >20% upside potential exH.R. Owen. There could be more upside if H.R. Owen pays dividends to SPTOTO or it is sold and proceeds are returned to SPTOTO shareholders.
Earnings outperformed but dividends within
3QFY6/22 net profit of MYR79.6m (+326% YoY, +49% QoQ) was the highest
quarterly net profit since the quarter ending 31 Jul 2018. It brought
9MFY6/22 net profit to MYR115.2m (-24% YoY) which was above our
expectations at 111% of our FY estimate. The outperformance was due to
higher than expected earnings from motor dealership, H.R. Owen. That
said, the third interim DPS of 2sen brought YTD DPS to 4sen which was
within our expectations at 63% of our FY estimate.
Huge jackpot helped but has been struck
Although the earnings outperformance was due to H.R. Owen, we note
that 3QFY6/22 gross NFO sales/draw recovered strongly to 90% of preCOVID-19 levels (2QFY6/22: 65%). The strong recovery was helped by
strong Supreme Toto 6/58 sales which were driven by its huge jackpot
which peaked at MYR97.8m on 30 Mar 2022. Given that the huge jackpot
was struck on the same date and sales usually level off after Chinese
New Year, our toto betting estimates are unchanged.
Raise FY22E/FY23E/FY24E earnings by 52%/5%/5%
Instead, we raise our earnings estimate to reflect higher earnings from
H.R. Owen. Its strong results in the last 2 years, especially used car
sales, have been due to supply chain disruptions to new car sales due to
COVID-19. Given that the global COVID-19 situation has eased, we expect
H.R. Owen earnings to moderate (Fig. 2). That said, H.R. Owen is part of
88%-owned Berjaya Philippines (BCOR PM, CP: PHP5.46) which does not
pay dividends to SPTOTO. Thus, we maintain our DPS estimates, nil BCOR
valuation and SPTOTO DCF-based TP of MYR2.24 (Fig. 3).