Wednesday, April 13, 2011

BJTOTO - OSK Research downgrades BToto to Neutral, Fair Value RM4.65

Stock Name: BJTOTO
Research House: OSK

KUALA LUMPUR: OSK Research has downgraded BERJAYA SPORTS TOTO BHD [] (BToto) from Trading BUY to Neutral but maintains its Fair Value at RM4.65.

It said on Wednesday, April 13 BToto's core operational growth is likely to remain subdued as it continues to face stiff competition from Magnum, coupled with a matured domestic NFO market, while its stock price is already trading close to its fair value of RM4.65 which already implies a fairly rich 16.5x FY12 PER,' it said.

On Tuesday, a Reuters report said BToto may be considering selling a 49% stake in its unlisted gaming unit for roughly US$1bn (RM3.02bn) and has hired Citigroup Inc as adviser. The potential sale is expected to generate interest from private equity firms, including the likes of Carlye group and Providence Equity Partners.

OSK Research said although further news on the potential stake sale of its gaming assets could continue to excite the company's share price in the near term, the upside is likely to be limited and would be fairly close to our fair value of RM4.65, and the loss in material earnings contribution from a 49% stake sale in its jewel Sports Toto Malaysia Sdn Bhd will more or less offset the potential special dividend upside arising from the sale proceeds.

'Risks to our view are: i) a higher than expected price paid for its 49% stake and hence stronger special dividend upside potential to offset loss of earnings and recurring dividend payouts, and ii) potential privatization over and above our and market fair value of the stock,' the research house said.

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