Top Story : Gaming – Pool betting duties raised by 2%-points Neutral (down from OW)
B-Toto : Struck by pool betting duty hike Market Perform (down from OP)
News Update
- BToto announced that the Ministry of Finance has raised the pool betting duty (PBD) for all NFOs to 8% (from 6%), to be applicable retroactively from 1 June 2010. Recall the PBD is applicable on gross turnover, after deduction of gaming tax of 8%.
- We understand this move by the Government comes as a surprise to the NFO players, and as such, there is no intention to revise the prize pool downwards for the moment. However, we believe this would be a matter of discussion among the NFOs as they will have to agree upon the quantum of change, if any, and apply to the Government to change it. Assuming an unchanged prize pool and no changes to our sales volume assumptions, the impact of the 2%-pt hike to BToto’s net profit is -12% p.a..
- We think that an additional risk has emerged for the gaming sector as a whole, as this move by the Government, as well as the recent abortion of the sports betting licence deal, could potentially signify a turnaround in policy with regards to the gaming sector and could mean a further crackdown on industry players. This could also potentially spell an oncoming hike in casino gaming duties (now at 25%). We
estimate every 1%-pt hike in casino gaming tax would impact earnings by 2-3% p.a..
- We have revised down our forecasts by 12-12.1% for FY11-13 to take into account the PBD hike. We have also reduced our DPS forecasts accordingly, to maintain our 80-85% net payout ratio assumption, translating to lower net yields of 5.7-6.2% p.a. (from 6-7% previously). Post-earnings revision, we reduce our DCF-based fair value to RM4.45 (from 5.05). Due to the higher risks involved in the sector, we are downgrading our recommendation to a Market Perform (from Outperform).
RHB Equity 360° ( B-Toto/Tanjong, Telecom, Semicon, Oil & Gas; Technical: Sinotop) - 02/07/2010
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