PETALING JAYA: Brokerage firms do not expect the reopening of Sports Toto Bhd
’s outlets in Kedah and Perlis to boost its income level in a significant way as the states only accounted for a small number of its total number forecasting operations (NFO).
Sport Toto’s prospects in the financial year 2025 (FY25) will depend more on its NFO business performance returning to pre-pandemic levels and higher sales of autos by its HR Owen dealerships on new launches, they believe.
“We are relatively neutral regarding the impact of the potential re-openings on our earnings forecasts, as both Kedah and Perlis accounted for about 25 outlets (or less than 5% of existing outlets).
For HR Owen, car sales volume will be boosted by deliveries of various newly launched iconic models such as Lamborghini Revuelto, Rolls Royce Spectre, Ferrari Purosangue (sports utility vehicle) and Daytona SP3.
“However, we pencil in a flattish year-on-year (y-o-y) revenue growth after taking recent ringgit strength against the pound into consideration,” HLIB Research stated in a report on Sports Toto following the closing of its fourth quarter ended June 30, 2024 (4Q24).
The company’s 4Q24 results came in within expectations as gaming revenue further recovered and achieved about 87% of pre-pandemic levels.
Sports Toto posted core earnings of RM73.9mil for the quarter, which took its FY24 sum to RM230mil, up 7.8% y-o-y mainly attributed to lower prize payout and stronger car sales which led to a 3.4% growth in revenue.
It declared a fourth interim dividend of two sen per share, bringing FY24 dividend to 10 sen per share (FY23: nine sen) and representing a 61.3% payout. This implies a total yield of around 6.3% for FY24.
UOB Kay Hian (UOBKH) Research anticipates Sports Toto to see further improvement in ticket sales in FY25 after seeing classic game’s ticket sales recovered to 85% to 90% of pre-pandemic level in FY24.
“We anticipate this to further recover to 95% to 100% in FY25. Sports Toto is still facing market share challenges from illegal operators but there has been a gradual shift in habits with punters who were previously executing bets through illegal bookies now changing their behaviour as authorities accelerated clampdown efforts.
Potential tailwinds may also emerge for Sports Toto if the government allows legal operators to commence online operations,” the research firm stated.
UOBKH Research thus retained its “buy” call on the stock with a higher target price (TP) of RM1.98 a share (from RM1.82 earlier) on the prospects of it delivering progressive earnings recovery and offering a compelling prospective yield of about 8% in FY25.
“Investors’ sentiment should recover and focus should return to the group’s bargain valuations, especially since the political landscape has largely stabilised,” it added.
HLIB Research meanwhile upgraded Sports Toto to a “buy” from “hold” with a higher TP of RM1.85 a share (from RM1.60 previously) and raised its earnings forecast for the company by 5% and 6% for FY25 and FY26.
