SPORTS TOTO BERHAD Weaker Earnings, Downgrade To Neutral
DESCRIPTION
Malaysia’s leading numbers forecast operator (NFO) offering toto betting and lotto gaming.
12-Month Target Price
Market
SHARE PRICE CHART
SHARE PRICE PERFORMANCE
| 1M | 3M | 6M | |
|---|---|---|---|
| Absolute Returns | 1.5 | 8.2 | -3.7 |
| Relative Returns | 0.1 | 1.7 | -6.3 |
KEY STOCK DATA
MAJOR SHAREHOLDERS
Sports Toto Bhd (Sports Toto) reported a 40.3% decline in 4QFY25 net profit to RM40.3m, largely due to weaker gaming profit. For FY25, results were in line with expectations, making up 98% and 96% of our and consensus estimates, respectively. While revenue was down marginally by 1.3% YoY, earnings posted a larger decline due to higher operating expenses for the gaming division. This was mainly due to higher corporate social responsibility sponsorships. We make no changes to our FY26-27F earnings forecasts. Since our upgrade to Trading Buy on 21 May 2025, Sports Toto’s share price has risen by about 8%. Given a limited upside potential < 2% to our TP of RM1.48, we cut our rating on Sports Toto to Neutral. A fourth interim dividend of 2.0sen per share was declared (4QFY24: 2.0sen per share).
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4QFY25 revenue dropped marginally by 1.3% YoY. Although the number of draws remained unchanged, STM Lottery’s revenue rose 3.7% YoY, mainly driven by stronger ticket sales as a result of higher accumulated prizes from 4D Jackpot game. Meanwhile, HR Owen’s revenue fell by 4.1% YoY due to lower sales volume in the new car sector. This was attributed to the change in distribution structure of certain manufacturers and the product life cycle of certain car models.
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4QFY25 net profit dropped by 40.3% YoY, as both the gaming and motor dealership divisions incurred higher operating expenses. STM Lottery’s profit was dragged by higher corporate social responsibility sponsorships while expenses at HR Owen were higher due to the increase in marketing cost in relation to brand positioning efforts.
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Outlook. While we like Sports Toto’s business that mostly dependent on the domestic market, we are not positive of its recent related party transaction due to the unappealing acquisition cost. Although the cash consideration of RM24.9m to acquire three commercial units from its sister company (Berjaya Asset) appears immaterial relative to Sports Toto’s cash reserves of RM790.4m, it still raises eyebrows given a hefty price tag of RM15,211psf. The justification of investing in income-generating assets as well as potential for future capital appreciation seems unconvincing. We do note that questionable related party transactions are not uncommon amongst the gaming operators in Malaysia, raising concern on corporate governance and transparency issue. In view of a limited upside potential from our DCF-based TP of RM1.48, we cut our rating on Sports Toto from Trading Buy to Neutral.
KEY FORECAST TABLE
| FYE June (RM m) | 2024A | 2025A | 2026F | 2027F | 2028F | CAGR |
|---|---|---|---|---|---|---|
| Revenue | 6,356.1 | 6,461.0 | 6,781.8 | 6,983.7 | 7,192.4 | 3.2% |
| Operating Profit | 400.1 | 430.1 | 434.9 | 446.6 | 451.1 | 3.7% |
| Pre-tax Profit | 342.8 | 370.8 | 369.7 | 384.7 | 389.2 | 3.9% |
| Reported NP | 218.0 | 237.0 | 239.3 | 250.2 | 254.2 | 4.7% |
| EPS (Sen) | 16.2 | 17.7 | 17.8 | 18.6 | 18.9 | 4.8% |
| P/E (x) | 9.0 | 8.3 | 8.2 | 7.8 | 7.7 | |
| DPS (Sen) | 10.0 | 8.0 | 9.8 | 9.3 | 9.5 | |
| Dividend Yield (%) | 6.8 | 5.5 | 6.7 | 6.4 | 6.5 |
Table 1: Results Summary
| FY June 30 (RM m) | 4QFY25 | 4QFY24 | YoY chg (%) | QoQ chg (%) | FY25 | YoY chg (%) | YoY Comparison |
|---|---|---|---|---|---|---|---|
| Revenue | 1,629.7 | 1,650.6 | (1.3) | (14.5) | 6,461.0 | 1.7 | Higher gaming revenue was offset by lower contribution from motor dealership |
| Gaming | 86.5 | 102.3 | (15.5) | (41.7) | 432.6 | 13.1 | Dragged by higher operating expenses such as CSR sponsorships |
| Motor | 16.1 | 21.2 | (24.0) | (35.7) | 33.0 | (25.2) | In tandem with the decline in revenue due to weaker sales |
| Others | (9.1) | (2.2) | 315.6 | >100 | (22.3) | 107.7 | |
| Unallocated corp exp | (3.4) | (3.3) | 2.9 | 9.7 | (13.1) | (13.8) | |
| Operating profit | 90.1 | 118.1 | (23.7) | (45.9) | 430.1 | 7.4 | |
| Investment inc/exp | (9.3) | 3.7 | >(100) | >(100) | 11.1 | (58.3) | |
| Finance cost | (23.6) | (22.2) | 6.7 | (0.9) | (92.4) | (4.5) | |
| Associate & others | 15.1 | 4.5 | >100 | >100 | 22.0 | 78.1 | |
| Pretax Profit | 72.3 | 104.2 | (30.6) | (51.0) | 370.8 | 8.2 | |
| Tax | (31.5) | (34.8) | (9.5) | (21.3) | (133.3) | 9.0 | |
| Minorities | (0.4) | (1.8) | (76.5) | (76.6) | (0.5) | (81.2) | |
| Net profit | 40.3 | 67.6 | (40.3) | (61.8) | 237.0 | 8.7 |
Source: Company, PublicInvest Research
KEY FINANCIAL DATA
INCOME STATEMENT DATA
| FYE June (RM m) | 2024A | 2025A | 2026F | 2027F | 2028F |
|---|---|---|---|---|---|
| Revenue | 6,356.1 | 6,461.0 | 6,781.8 | 6,983.7 | 7,192.4 |
| Cost of sales | (5,956.0) | (6,030.9) | (5,738.9) | (5,965.0) | (5,975.4) |
| Operating Profit | 400.1 | 430.1 | 434.9 | 446.6 | 451.1 |
| Net Investment | 26.5 | 11.1 | 10.0 | 10.0 | 10.0 |
| Finance Costs | (96.7) | (92.4) | (83.2) | (81.9) | (81.9) |
| Pre-tax Profit | 342.8 | 370.8 | 369.7 | 384.7 | 389.2 |
| Income Tax | (122.2) | (133.3) | (125.7) | (130.8) | (132.3) |
| Effective Tax Rate (%) | 36 | 36 | 34 | 34 | 34 |
| Minorities | (2.6) | (0.5) | (4.7) | (3.7) | (2.7) |
| Reported Net Profit | 218.0 | 237.0 | 239.3 | 250.2 | 254.2 |
Growth
| 4.2 | 1.7 | 5.0 | 3.0 | 3.0 | |
|---|---|---|---|---|---|
| Revenue (%) | 10.9 | 7.5 | 1.1 | 2.7 | 1.0 |
| Operating Profit (%) | (1.8) | 8.7 | 1.0 | 4.6 | 1.6 |
| Net Profit |
Source: Company, PublicInvest Research estimates, *Based on 14-month FY19
BALANCE SHEET DATA
| FYE June (RM m) | 2024A | 2025A | 2026F | 2027F | 2028F |
|---|---|---|---|---|---|
| Fixed Assets | 614.2 | 623.9 | 651.8 | 664.8 | 678.1 |
| Cash and Cash Equivalents | 742.8 | 790.4 | 856.9 | 1,022.2 | 1,191.0 |
| Goodwill and Intangible Assets | 730.2 | 721.5 | 730.2 | 730.2 | 730.2 |
| Other Assets | 1,873.3 | 1,855.2 | 1,998.1 | 1,976.8 | 1,953.8 |
| Total Assets | 3,960.4 | 3,990.9 | 4,237.0 | 4,394.0 | 4,553.2 |
| Payables | 627.4 | 630.3 | 705.8 | 734.0 | 763.4 |
| Borrowings | 1,442.6 | 1,500.1 | 1,300.0 | 1,300.0 | 1,300.0 |
| Other Liabilities | 664.1 | 611.5 | 664.1 | 664.1 | 664.1 |
| Total Liabilities | 2,734.2 | 2,741.9 | 2,669.9 | 2,698.1 | 2,727.4 |
| Shareholders’ Equity | 1,155.9 | 1,170.9 | 1,483.4 | 1,608.6 | 1,735.6 |
| Total Equity and Liabilities | 3,960.4 | 3,990.9 | 4,237.0 | 4,394.0 | 4,553.2 |
Source: Company, PublicInvest Research estimates, *Based on 14-month FY19
PER SHARE DATA & RATIOS
| FYE June | 2024A | 2025A | 2026F | 2027F | 2028F |
|---|---|---|---|---|---|
| Book Value Per Share | 0.9 | 0.9 | 1.1 | 1.2 | 1.3 |
| EPS (Sen) | 16.2 | 17.7 | 17.8 | 18.6 | 18.9 |
| DPS (Sen) | 10.0 | 8.0 | 9.8 | 9.3 | 9.5 |
| Payout Ratio (%) | 61.7 | 45.3 | 55.0 | 50.0 | 50.0 |
| ROA (%) | 5.5 | 5.9 | 5.6 | 5.6 | 5.4 |
| ROE (%) | 18.9 | 20.2 | 16.1 | 15.6 | 14.6 |
Source: Company, PublicInvest Research estimates
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