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Tuesday, June 13, 2017

BJTOTO: A Value Gaming Stock


The hefty tax penalty levied by the Inland Revenue against Magnum has caused investors with BJToto to sell-off their BJToto shares in order to avoid a similar debacle happening in BJToto or simply to swap their BJToto shares for much-cheaper Magnum shares. Is BJToto less attractive as compared to Magnum? Is BJToto worth considering for long-term investment?

Result Update

For QE31/1/2017, BJToto's net profit dropped 23% q-o-q or 18% y-o-y to RM48 million while revenue was mixed - down 6% q-o-q but up 3% y-o-y - to RM1.367 billion. Overall revenue dropped q-o-q mainly due to lower revenue reported by H.R. Owen and International Lottery & Totalizator Systems, Inc (the latter was due to recognition of substantial project contract sales). These were partly mitigated by higher revenue recorded by Sports Toto and Philippine Gaming Management Corporation. As a result of a drop in revenue, the Group's pre-tax profit declined by 9.6% q-o-q. (Note: BJToto's latest result is for QE31/1/2017 which was released on March 16, 2017. Next quarterly result is for QE30/4/2017 and that should be released next week.)


Table : BJToto's last 8 quarterly results

Revenue jumped in QE31/1/2014 due to the consolidation of H.R. Owen's revenue onto the Group's account. Despite the sharply higher revenue, the Group's bottom-line remained flat as the H.R. Owen's profits were not significant.


Graph: BJToto's last 14 quarterly results

Financial Position

BJToto's finaial position as at 31/1/2017 is deemed adequate, with current ratio at 1.05x gearing ratio at 2.19x.

Valuation

BJToto (closed at RM2.56 last Friday) is now trading at a PER of 12.6 times (based on last 4 quarters' EPS of 20.3 sen). Its dividend payment for the preceding 4 quarters amounted to 16 sen; giving the stock a dividend yield of 6.2%. At these PER & DY, BJToto is deemed fairly attractive.

Technical Outlook

BJToto has been sliding for the past 4 years from RM4.00 in mid-2013 to the current price of around RM2.50.


Chart 1: BJToto's monthly chart as at Jun 13, 2017_10.00 (Source: ShareInvestor.com)

BJToto's latest selldown happened after the stock broke below the horizontal line at RM2.90. At the current price level of RM2.50, BJToto appears to have found buying support.


Chart 2: BJToto's weekly chart as at Jun 13, 2017_10.00 (Source: ShareInvestor.com)

Conclusion

Based on its lower price, BJToto is once again trading at fairly attractive valuation. Despite the negative technical outlook, BJToto is a stock worth considering for long-term investment at this beaten down price.

Note:
 
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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