KUALA LUMPUR: Alliance DBS Research says Berjaya Sports Toto lacks gaming sparks and it is maintaining a Hold call with a target price of RM3.10 based on the dividend discount model.
It said on Monday in view of lacklustre industry prospects and absence of near-term re-rating catalysts, the stock is fairly valued at this juncture.
“Earnings prospects for number forecast operators (NFOs) will continue to be dampened by (1) full absorption of GST cost; they will not pass that on by lowering prize payouts, (2) slow discretionary consumer spending, (3) the presence of illegal NFOs, and (4) regulatory risks,” it said.
Alliance DBS Research said the introduction of new game variants could bring excitement to the sector, but it does not foresee any such announcements in the near term.
Share price continues to be supported by decent dividend yield. The research house reduced earnings by more than 3% after some housekeeping adjustments.
Despite the sluggish growth prospects, the decent dividend yield will continue to support the share price. The group’s strong cash flow generation capability and healthy balance sheet allow it to consistently pay out 80% or more of net profit, which implies more than 6% dividend yield.
“Post-earnings adjustment, we trimmed target price for the group to RM3.10 (from RM3.16), based on the dividend discount model.
“The key risk to our view is steeper-than-expected decline in ticket sales with rising competition and weaker consumer sentiment,” Alliance DBS Research said.
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