SPTOTO: Robust NFO Performance Drives Solid Earnings, ‘Buy’ Rating Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM1.71 (+19.2%) |
| Last Traded | RM1.46 |
| Recommendation |
TA Securities has reiterated its “Buy” recommendation following a review of the company’s full-year FY25 financial performance, which saw core profit rise 12.4% year-on-year to RM252.7 million, aligning with the investment bank’s expectations. The strong performance was primarily driven by its Numbers Forecast Operator (NFO) division.
Performance Highlights
For the financial year ended FY25, core profit reached RM252.7 million. This commendable performance led to the declaration of a fourth interim dividend of 2 sen per share, bringing the total FY25 dividend payout to 8 sen per share, representing an attractive dividend yield of 5.5%. Overall group revenue expanded by 1.7% year-on-year, with the core profit margin remaining stable at 3.9%.
Divisional Performance
The NFO segment proved to be the primary growth engine, with revenue jumping 5.4% year-on-year to RM3.1 billion, despite three fewer draws compared to FY24. This robust outcome was largely attributed to a record jackpot amount of RM121 million in January 2025, which significantly stimulated buying interest, elevating NFO revenue per draw.
Conversely, the car franchising segment, represented by H.R. Owen, recorded flat revenue growth at RM3.3 billion. However, a notable 25.2% decline in Earnings Before Interest and Taxes (EBIT) to RM33.0 million for the segment was observed, primarily due to increased depreciation and interest costs.
Outlook and Projections
Looking ahead, management anticipates a strong start to FY26 for the NFO division, buoyed by the recent snowballing jackpot for Game Supreme 6/58. This is expected to push IQFY26 NFO revenue above the normal range. For the car franchising business, H.R. Owen’s operations are projected to remain challenging in the near term due to ongoing tariff threats impacting luxury goods spending. However, the situation is expected to improve as global markets adapt to the new tariffs in 2026.
Regarding the upcoming Budget 2026, the investment bank believes it will be a non-event for the NFO sector concerning gaming tax. Management also expresses optimism for more than eight special draws in 2026.
Valuation and Recommendation
TA Securities has adjusted its dividend discount model (DDM) valuation to RM1.71 per share, a slight reduction from the previous RM1.76, primarily due to changes in dividend forecasts. Despite this adjustment, the investment bank maintains its “Buy” recommendation, with the new target price representing a potential upside of 19.2% from the last traded price of RM1.46.
