MPHB- spooked by competitor's new game

Berjaya Sports Toto Bhd will introduce a new game, which is similar to the 4D Jackpot introduced by Magnum 4D last year. This game is likely to boost its sales and expand its market share. As a result, the share price has risen from RM4.30 to a recent high of RM4.50. For more, go here.

BJToto has just announced its results for QE30/4/2011, where its net profit dropped 9.3% q-o-q to RM104 million on the back of a 5.9%-increase in turnover to RM901 million. The decline in net profit on a q-o-q basis was attributable to poor performance by the Philippines operation, which recorded a lower turnover & net profit. Compared to the same quarter last year (QE30/4/2010), net profit increased by 29% while turnover was up 5%.


Chart 1: BJToto's daily chart as at June 20, 2011 (Source: Tradesignum)

The rise of BJToto coincided with the drop in MPHB, the parent of Magnum. From Chrta 2 below, we can see that MPHB has broken below the accelerated uptrend line S2-S2 and may soon test the next accelerated uptrend line S1-S1. The support at uptrend line S1-S1 is about RM2.85 and the next support is at the horizontal line of RM2.70.


Chart 2: MPHB's daily chart as at June 20, 2011 (Source: Tradesignum)

I believe that this decline is overdone, driven by fear that the new 4D Jackpot game from BJToto would eat into Magnum 4D Jackpot game. While Magnum 4D Jackpot may suffer a drop, I believe this drop will not be significant. As such, I believe MPHB presents a good buying opportunity at the present price of about RM2.85-2.90.