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Tuesday, March 20, 2018

Capitaland 'outperform', Berjaya Sports Toto 'buy'

Tuesday, 20 Mar 2018
by analyst reports


By Kenanga Research


Target price: RM1.35

CapitaLand Malaysia Mall Trust (CMMT)’s share price has declined 30% year-to-date and is below the initial public offering (IPO) price of RM1.08 (in 2010).

Investors are concerned about the oversupply of retail spaces in the Klang Valley which resulted in the following – Sungei Wang Plaza’s (SWP) negative reversions of -16.9%, which has improved from -30% since FY15, and negative reversions at The Mines (TM) due to the consolidation of tenants at the Digital Mart.

Kenanga Research had previously accounted for this, expecting negative reversions at SWP (-20%) and TM (-5%), and mid-single digit reversions for CMMT’s other assets.

The research house’s meeting with the management indicates that they are actively addressing the currently challenging landscape by rejigging their tenant mix strategy.

“We note that its weaker assets (SWP, TM, and Tropicana City Mall) are seeing reconfiguration of tenant space from the ‘large anchor tenants’ into more themes and concepts, which create a variety of niche tenants.

“This helps to address the common saying nowadays (that) ‘all malls are the same’,” said Kenanga Research.

All in, the research house maintains its capex assumptions of RM70mil to RM50mil in FY18 to FY19 as it has accounted for this.

However, Kenanga Research believes the malls may see some rental downtime during this period.

The management expects most of the asset enhancement initiatives (AEIs) to be completed by the second half of 2019, and the research house conservatively assumes full effects of the AEIs will only be felt from FY20 onwards.

By UOB Kay Hian
Buy (maintained)
Target price: RM2.80

Berjaya Sports Toto (BST) reported third quarter FY18 (Q3FY18) revenue of RM1.4bil (+2.7% year-on-year, +1.5% quarter-on-quarter) and core net profit of RM59mil (+23.6% y-o-y, - 4% q-o-q).

Nine-month FY18 net profit of RM193mil (+8.2% y-o-y) was below UOB Kay Hian’s expectations due to the higher-than-expected effective tax rate. The nine-month FY18 profit before tax (PBT) of RM312mil was in line with expectations, representing 74% of UOB Kay Hian’s full-year forecast.

Sports Toto Malaysia’s Q3FY18 revenue dropped 3.3% y-o-y as Q3FY17 benefitted from seasonally higher sales during the Chinese New Year festive period in January, and Q3FY17 had 47 draws, one additional draw compared with Q3FY18. The research house estimates the revenue mix of jackpot games and classic games to be largely unchanged y-o-y in Q3FY18.

Despite the drop in revenue, PBT increased 19.6% y-o-y in Q3FY18 due to lower prize payout and lower operating expenses incurred.

Q3FY18’s prize payout is estimated to be close to 62%, 0.5 percentage points lower than Q3FY17’s. BST declared a third interim dividend per share (DPS) of 4 sen, bringing the nine-month FY18 dividend per share (DPS) to 12 sen.

“We expect the industry to see at best, low single-digit ticket sales growth in 2018.

“2017 saw yet another year of uninspiring number forecast operator (NFO) ticket sales, with quarterly y-o-y ticket sales per draw growing in the range of -5% to +2% in 2017.

“Nevertheless, industry sales are expected to stabilise after years of decline. We understand that some state authorities have recently increased efforts to curb illegal NFO operations, although the sustainability of curbing illegal operators remains a long-term concern,” said UOB Kay Hian.


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