Berjaya Sports Toto Bhd

Everything in place but the dividends
Sports Toto's 2Q earnings were line with our estimates, with revenues 54% of our full year estimate, but net profits 48% of our full year estimate. Dividend per share rose 17% (or 1 sen) but its div payout still fell short of the promised 75% for the year. Mgmt reiterates its div payout target will still be achieved, and given last year's div behaviour, we believe the divs will be delivered. Buy maintained.

Strong revenues, low prize payout, both due to Jackpot
2Q net profit grew 27% YoY, 23% QoQ, as revenue growth was boosted by punters chasing the RM20mn prize offered by Toto's 6/52 jackpot game. We estimate the prize payout was ~2 ppts below prize payout in the comparative quarter, which is partly a function of a higher proportion of jackpot game sales, since such games have a lower theoretical prize payout (55% compared to the 65% for 4 digit games). Rev/draw grew 9% QoQ and 21% YoY, superior to Tanjong's 2.6% YoY growth and flat QoQ for the same 3 mth period, attesting to the importance of the Jackpot games to growth. We expect a similar strong 3Q as the Jackpot prize is still at RM20mn.

Dividends - still the dark cloud on the horizon
2Q div payout fell from 61% in the immediately preceding quarter to 58% this quarter or 59.4% for the 6 mths. Toto stated it remains committed to a 75% div payout policy, suggesting its div payout will catch up in the final quarter, as it did last year, when 4Q div payout exceeded 100% to close the year's div payout at 93%. This allows the co to pay rising dividends in the yr without being caught out by unusually high prize payouts in the later quarters.