Berjaya Sports Toto - BUY - 6 Mar 2008

9MFY08 revenue of RM2.4b was in line with our’s and market’s
estimates. Net profit of RM287.9m however was lower at 70% of our’s
and street’s consensus, mainly due to lower luck factor and higher
marketing expense.

l QoQ, revenue was up by 8.7% driven by increased sales of 4D games
despite similar draw days of 42 each quarter. Stronger pre-tax growth at
24.2% was boosted by a lower payout (69% vs 72%) coupled with the
higher sales volume.

l YoY, 9MFY08 revenue jumped 9.3% on the back of higher 4D sales
and contributions from sales of Mega 6/52 since 2Q07, despite having
one less draw day. Pretax profit however increased by only 3.0% to
RM408.7m, owning to lower luck factor and lower interest income as intercompany
loan was completely settled in July 07.

l Proposed dividend of 8 sen brought 9MFY08 DPS to 26 sen against
9MFY07 of 37.5 sen, implying payout ratio of 83%. Our forecasted DPS of
36 sen for FY08 based on net payout ratio of 82% should be met based on
the current trend.

l Continual share buyback with total 93m treasury shares as of 31 Jan 2008,
representing 6.9% of its paid up share capital. Assuming the treasury
shares are dividend out in specie, yield should therefore spike up to a
high of 14.7% (7.3% normal + 7.4% special).

l Attractive yield and defensive growth. Sales growth is expected to
average 6.4% for the next 2 years, spurred by resilient economy with FY08
GDP growth forecasted at 6.1%. Yield is attractive at 7.3% and 7.8% for
FY08 and FY09 respectively. Maintain forecasts and BUY call with an
unchanged target price of RM5.60, based on DCF valuation with a
WACC of 10% and terminal growth of 4.5%.

KENANGA INVESTMENT BANK BERHAD (15678-H)