BJ TOTO - Some more upside?

Two research houses "overweight" Berjaya Sports Toto Bhd (BJ Toto) on the basis of its dominance in the numbers forecast operations (NFO) and dividend yields.

Although the fourth quarter results ended April 30 (FY4/07) were marginally off by 3% of market estimates and 2% below consensus, CIMB Research were generally happy with BJ Toto’s performance.

They, however, did note the unsatisfactory fourth interim dividend per share (DPS) of 7.5 sen which fell short of their 10.5 sen expectation; bringing full-year DPS to 45 sen (8.5% gross yield) versus their projection of 48 sen. According to them that translated into a dividend payout of 118% for FY07.

It pointed out that BToto's 4.8% on-year growth for 4Q07 was commendable as there were two fewer draw days. According to their analysis, growth of gaming revenue per draw was even better at 9.7%.

On the future outlook of BJ Toto, the research house projected a 7% improvement in FY08, to be forthcoming from more market share gains within the 4D segment due to its growing popularity, as well as expansion of the non-4D segment.

On June 23, BToto launched its Mega 6/52 Jackpot with a minimum RM2 million jackpot. This gave its daily lotto revenues a 25% boost. With three lotto games now, it believed BToto's core 4D operations would be a prime beneficiary.

CIMB is maintaining a prize payout assumption of 68%, which will provide potential upside surprises when luck factors normalises.

It also raised BToto's target price to RM6.60. It trimmed the estimates for FY08-09 back by 1% — 2% to reflect fewer draw days and the lower FY07 lotto revenue base. It also scaled back its dividend expectations slightly, although yields remain highly attractive at over 8.5%.

It cited upside catalysts to be the continued market share gains with the new game providing extra ammunition; normalisation of luck factors and the still-attractive gaming industry dividend yields.

Meanwhile, SJ Research said it has "overweight" BToto similarly on its dominance in the NFO industry.

It said BToto's 4Q07 revenue came within its expectation, but its net profit was below its forecast. The group's revenue increased by 3.3% to RM3 billion, compared with RM2.9 billion a year ago. The higher revenue was spurred by better sales of 4 Digit game and full year contribution of 4 Digit I-Perm game when compared to seven months contribution in the previous year.

However, BToto registered 8.9% decrease in earnings from RM464.5 million to RM376.6 million, mainly attributable to the t tax write back of RM51.8 million in the previous year. Hopefully this is a rare occasion.

As expected, the Group declared a fourth interim dividend of 5.5 sen per share bringing the full year dividend payout to 32.7 sen per share.

SJ Research favours BToto due not only to its dominance in the NFO industry but also its relatively stable profits which are not highly correlated with economic conditions.

"Due to its strong balance sheet and its cash generative assets, we expect the group to maintain its high dividend payments. In view of the rising risk premium and high volatility in the market, we believe the defensive nature of BToto will be an ideal stock to have in everyone's portfolio," it said.

SJ Research fairly valued BToto at RM5.65 based on its discounted cashflow model. It was maintaining its "Overweight" recommendation on the company due to its decent gross dividend yield of 7% and a total return exceeding 13%.

In fact, BJ Toto went up to RM5.50 today (2 July 2007) on heavy volume trading. Let us see how high it will go in the next few days.

Heartsong

Hidden Assets

Talk about hidden assets.

Except for the most intrepid and learned investors and the stock market intelligentsia, few keep their ears on the ground to trends or policy measures.

The key-word here is privatisation. If Maxis had been taken private for personal profit, the other reason for taking a listed company private is the trend to remove multi-tiered listed entities to focus on just one listed entity.

Kumpulan Hartanah Selangor Berhad (KHSB) is currently in the process of taking Worldwide Holdings Bhd private. The market is now speculating that KHSB will be the next company targeted for privatisation by the State Government. It is only the timing that they are unsure of.

KHSB announced last week it proposed to sell 37.4 acres of land on Pulau Indah to the Fraser & Neave Holdings Bhd group for RM27.7mil cash. That works out to a price of about RM700,000 an acre.

The interesting aspect of that is KHSB owns 2,625 acres on the island, which are carried in its books at just RM79,000 an acre. KHSB did not disclose the profit on the sale. According to KHSB's Finance Manager, the profit was not disclosed because the land forms part of the Halal Hub to be developed, and KHSB has obligations such as to construct certain facilities. He added that profit will only be recognised based on the percentage of completion of the Halal Hub project and not on the outright sale of land.

He further informed that Pulau Indah is ear-marked for mixed development and part of it will be for residential usage including low and medium cost housing. The remainder is 900 acres of prime property frontaging the coastline with great prospects for super earnings for KHSB.

Kumpulan Hartanah Selangor Bhd (KHSB) is a subsidiary of Kumpulan Perangsang Selangor Bhd (KPS), which is in turn a listed company controlled by the Selangor State Government. So it looks like the only company to be listed on the board by the Selangor State government will by KPS.

Remember Cash-Band, the special vehicle created by the State Government to make KPS the parent company of KHSB and all its sundry investments? That has already been done legally. Cash-Band will be the main beneficiary of all the property-related businesses of KHSB. And who do you think is waiting in the wings to partake of the moolah? KPS, that's who. Profits galore awaits the shareholders of KPS - from the property, the water utilities and the toll highway projects; not to mention all the other projects that are still under wraps.

So, will KPS move as the news start sinking into the minds of analysts, fund managers and investors?

Heartsong

AMDB - Game Not Over!

So the Roman Emperor Claudius was wrong. He put his thumb sign down too soon to finish off our gladiator AMDB Maximus. I was wrong too. I thought, after the churning, the raiders would have disappeared and melesap with their gains.

But lo and behold! how wrong can one be. They are back like Die Hard 4.0, jumping in again like John McClane, with 4 times the vigour to push up AMDB to 40 sen for a 2 sen gain. Volume traded was 14.15 million, in spite of a most boring market.

They either think this counter needs a re-rating or that it should be played up ahead of the so-called global property hub incentives to be announced soon. So bang goes....but who is the Piper and who are the rats?

Let us see what the volume will be tomorrow.

Heartsong

Buckling at the Knee

As a follow up to my earlier blog today, all indicators pointed to a falling market as the first session ended. Buckling at its knee, it seems to weaken with every fading minute.

But what do you know, it happened during the "angel hour" in the afternoon. Market rose by 10 points to 1,364.37. However, gains were trimmed down. Those which were down, stayed down. MOX, UMW, Commerce and SP Setia went up and Equine lost big time falling 60 sen to RM3.60 followed by SAAG and Tanjong.

Market leaders, Genting and Resorts move ahead of the crowd. Gentings chalked up 25 sen to RM8.50 on the back of 14.2 million shares. Resorts took top spot in volume where 32.8 million shares were traded. It finished up 20 sen to RM3.66. BJ Toto also came to life in the afternoon putting on 25 sen to RM5.50. Meanwhile second liners were side-lined. KPS lost a sen to RM1.70 while penny stocks RCE slided down a sen to 97 sen. The other penny stocks like AMDB and Metronic were up, though. The former added 2 sen to 40 sen while the latter was a sen better at 43 sen. WMC remained unchanged at RM1.13 while JAKS slumped to 72 sen for 2.5 sen loss.

I believe the start of another "stariway to heaven" is in the offing. If buyers come in tomorrow in hot pursuit of shares which had been pared down in price, we are gonna have fun as well.

So, tell Cyndi - not only girls can have fun.


Heartsong

The Moon and Stars Come out to Play

Just like the lyrics of the song, the fund managers are just playing footsie these days. ''I will let go some blue chips as I bought them cheaper'', says some. The other fund managers , thinking that valuations are cheap, will pick them up on the price slag. Look at Dutch Lady, Commerce, UMW and MOX-up a few days, some days sitting pretty still, on rainy days-down. Typical blue chip behaviour. Don't play with these big boys!

For the broader market, they have decided to ignore Wall Street which went south on Friday last. Bursa garnered 6.5 points to 1,360.93 by the noon close. Most counters which made early gains shows that they had surrendered them "bulat-bulat".

Where is the market going? The money may be willing but the timing sucks! So today, the small man is looking around for good bargain counters to buy in, bringing down the prices further as weak suckers sell down their portfolio.

The Genting-Resort pair pushed higher this morning. Genting upped 25 sen to RM8.50 while Resorts galloped forward to clinch 14 sen at RM3.60. Looks like investors are chasing both counters relentlessly for more good news to come out of the Sentosa deal or elsewhere. No, definitely not because of the lousy dividends.

BJ Sports Toto will be paying out its smallish dividend soon. I think the counter is up 5 sen at RM5.30 because of Treasury buy-ins. KPS went down a sen to RM1.70 at a volume of 2.5 million shares. RCE was overnight at 98 sen while JAKS lost its jacking power and gravitate 1/2 sen lower to 74 sen.

AMDB got renewed buying support from punters and moved up 3.5 sen to 41.5 sen on a volume of 10.8 million shares. Metronic added 1.5 sen to 43.5 on a volume of 2.32 million shares, ahead of its ex-bonus on 9th July. Favourite whipping boy, WMC yoyoed beteween RM1.12 and RM1.18 before settling down smugly at RM1.15 for a 2 sen gain. So no action station yet-lah...

If the market can maintain its current performance, then I can see the possibility of a follow-through in the afternoon session. Then Bursa will trek up once more.

Heartsong

Is the Random Walk on AMDB over?

Before THE STAR write up a fortnight ago, the rumble for AMDB began. 10 trading days ago, it hurled sellers aside and shot up to a high of an intra-day high 45 sen from a an intra-day low of36 sen. It hogged the volume index for days. The last 5 days was a different story altogether. Volume went down and so did price. So, was it a churn by syndicates that brought the price up?

Or was it just random walk?

AMBD was a darling before First Iraqi War and was so as well when the market recovered after that. It was in the doldrums for a long time hibernating at 15 sen. Then with the beginning of the bull in November 2006, it went up.

Let us trace the movement of AMDB before the big push up . On 8 June AMDB was at the 30 sen level. On 22 June it went up 7 sen to 37 sen on a volume of 61 million shares and by 25 June, it was at 45 sen on the back of 58 million shares. That is a gain of 15 sen. That is a clean 50 sen profit for the taking.

Now, let us see the price reversal beginning 26 June 2007. It lost 3 sen to 42 sen on a reduced volume of 21 million shares. By 27 th June, it was down a sen to 41 sen on a volume of 20 million shares. It held steady on 28 June at 41 sen on a volume of 8 million shares. By Friday, 29 Jun it was at 38 sen, a fall of 3 sen on a volume of 13 million shares. Effectively it has gained 8 sen. Will it go down in price again on Monday, 2nd July?

It it does, then the whole thing was a shadow play - a situational churn up before the expected property play. For the moment, what can one say except that the market raiders were long gone!

Heartsong.

Time to Review JAKS

It has been quite sometime since JAKS came into the spotlight on Bursa. Since 23 April when it hit its highest price level of 90 sen on a historical volume of 47.3 million shares, it has not been really able to recapture the interests of medium-term buyers or speculators.

Beginning at 47 sen ,when 2007 opened, it fell to the lowest of 41 sen because of the US sub-mortgage fears. Subsequently because of the ''water play'', along with KPS, JAKS moved up notch by notch. June volumes were highest on 14 June (30 million),18 June (20 million) and 6 June (10 million).

Now let us look at the volume for the last 5 days when the market was in minus territory after some correction. On Monday (25 June), volume was 4.4 million; went down further to 3.7 million on Tuesday but strangely, it reversed trend on Wednesday to put on a volume of 4.5 million. Thursday saw its volume declining to 3.2 million shares and on Friday, it fell by almost 50% to 1.7 million shares. Except for Wednesday, the progression downwards is understandable with the overall falling market.

JAKS closed on 29 June at 74.5 sen, dropping 9.5 sen from Monday's close of 81 sen.It slided gradually to go down to 77 sen on Tuesday and held steady at 75 sen for a 2 sen less on Wednesday and Thursday. The highest intra-day was 83 sen and the lowest intra-day was 74 sen.

We are in July now. Watch out for the announcement of the tender of the Langat 2 project. I think it will be done of the heels of the submission of the Japanese project design by mid-July. Then expect rumours to come to the fore on the Langat 2 project which is under the purview of both the Water Resources Commission and the State Government of Selangor.

Remember JAKS has a sweet and sour relationship with the Selangor State Government because of the on-going court case. Just as in politics, for political or economic expediency, wonders can be done. Expect KPS to shoot up to be followed by the likes of Puncak Niaga, KHSB, Taliworks, Salcon and JAKS.

Heartsong