Dividend Yield Stocks (Part 1) – Berjaya Sports Toto

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Jul 24 2007
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There’ve been numerous requests from readers of FinanceTwitter on recommendation on stocks which give away good dividend yield”. This type of stock is also one of the favorites among the long-term investors who see it as a better alternative to banks’ fix-term-deposit saving or even the EPF’s (Employees Provident Fund) pathetic annual dividend. The latter is applicable for retirees who are planning to grow their hard-earned savings.

Basically stocks which can provide good and “consistent” dividend pay-out are normally defensive stocks, meaning comes rain or shine the stocks will still pay you dividend. I’ve previously blogged about two stocks (upon request from a loyal reader) which consistently pay relatively good dividends. The reader couldn’t make the decision as to which stock to invest, so FinanceTwitter published the article on Which Stock to Invest – GENTING or Public Bank? back in end of May 2007 to summarize the comparison.

FinanceTwitter New Mini Project

FinanceTwitter will starts (in no particular order) to publish several articles on stocks that provide “Good and Consistent Dividend Yield”, one stock at a time with more fundamental and technical information. I’ll neither commit on the time-period of the next subsequent article nor would I commit on the number of stocks which fit the topic. I’ll just let the flow takes its course. Let’s kick-start with one of my favorites, Berjaya Sports Toto Berhad (KLSE: BJTOTO, stock-code 1562).

Sports Toto Malaysia Sdn Bhd was incorporated in 1969 by the Government of Malaysia, was privatised on 1st August 1985 and thus separated its’ status quo as a state-owned gaming enterprise. Sports Toto is currently a wholly-owned subsidiary Berjaya Sports Toto Berhad which is listed on the Bursa Malaysia or Kuala Lumpur Stock Exchange.

Sports Toto is the sole national lotto operator with over 680 outlets throughout Malaysia and offers a variety of games – digit-type games (namely, 4D, 5D and 6D) and lotto-type games (namely, Toto 6/42 Jackpot, Super Toto 6/49 and Mega Toto 6/52). The Company has total staff strength of more than 450 working at its head office in Kuala Lumpur and branches throughout Malaysia, and over 1,500 staff employed by agents of the Company.

The Man behind Berjaya Sports Toto

If you do not know yet, Berjaya Sports Toto Berhad is part of Berjaya Corporation which is owned by none other than Tan Sri Dato’ Seri Vincent Tan Chee Yioun. Vincent used to be on the corporate front-page during the former premier Mahathir period. He was said to be one of the Chinese corporate cronies of Mahathir and he was well-known within the circular of stocks investors in the 1990s for the infamous “rights issue” and “bonus issue”, so much so that Vincent Tan’s listed companies consists of billions of floated shares – one of the highest around.

As the “King of bonus and rights issue”, it wasn’t a surprise that the share prices of his Berjaya companies rarely hit above 2-digit figure due to enormous floating shares in the market, with the exception of Berjaya Sports Toto. Due to the nature of the business, Berjaya Sports Toto is undoubtly the ultimate cash-cow for Berjaya Corporation and Vincent Tan as the largest shareholder.

Sports Toto’s Fundamental

Fundamentally, Berjaya Sports Toto, just like any other gaming (or gambling) stocks is a defensive stock. Despite the regulation which only allows certain days of the week for punters to bet on their luck, all the outlets continue to attract customers. Since 1997 (and prior to that) the revenue has never once registered below RM 1 Billion figure. During the 1997 Asia Economy Crisis the company saw a jump in revenue to breach the RM2 Billion mark – a proof that people will bet even more during the difficult time.

Profit has grown from a mere RM343.7 Million in 1997 to RM571.9 Million in financial year ended 2006. The earnings per share (EPS) were rather on the yo-yo trend mainly due to the inter-company restructuring but shareholders will definitely see 2-digit of earnings per share as registered since 1997.
The company reserve however has grown from 1997 from RM109 Million to RM1.2 Billion in 2002 only to be reduced to RM366 Million in 2004 before picking up to RM463 Million in 2006.

Technical Analysis on the Stock

Looking at the 3-year chart, Sports Toto has since rebound from the boring RM3.00 per share to above RM4.00 per share. Due to the consistent and expected result of the gaming stocks revenue, the share price rarely jumps (or drops) beyond imagination.
The first level support is at RM4.90 per share while the second level support is at the strong RM4.30 per share. The resistance is at the RM5.50 per share level. Since the stock breached the support of RM4.90 about a month ago (June 19th, 2007 to be exact) it could be too early to tell if the immediate resistance (RM5.50) or support (RM4.90) will holds.

However, if you analyze the volume distribution and accumulation pattern, the technical chart seems to comply with the rules, meaning the opportunity to buy when it consolidate to the support of RM4.90 nears.

Dividend Analysis

A glimpse on the gross dividend per share summary chart will shows that the Berjaya Sports Toto is a stock to own if you’re looking at the rare 2-digit return on investment. It wasn’t so attractive pre-2005 with a single-digit of dividend returns. For the financial ended 2005, it
declared a total RM0.45 per share of dividend while the attractiveness increased in 2006 when it declared RM0.51 per share. This is about 10 percent annual return, not a bad figure for dividend hunters.
It is estimated the company will declare the same $0.51 per share, if not higher, for the financial year ended 2007’s dividend payout. The latest dividend declared is the fourth interim dividend of 7.5 sen per share (less 27% income tax) with the expiration-date on Aug 15th, 2007 and the payment-date on Aug 30th, 2007. This 7.5 sen is however was said to be lower than the expected 10.5 sen by certain analysts.

Should you go in now?

This is perhaps the most popular question I received in my mailbox. While I can give you a 100-pages analysis, I simply cannot tell the future if some external factors beyond my control will take a particular stock out of the trading range as pictured in the technical chart. What I can tell is if everything goes by the book, the best time to go in is at RM4.90 or slightly lower, provided you are lucky enough.

On June 23, Berjaya Sports Toto launched the Mega 6/52 Jackpot with a minimum RM2 million jackpot. This gave its daily lotto revenues a 25% boost and with three lotto games in its belt, it is believed the stock will continue to performs.

Having said that, if you happen to see an abnormal high volume or selling, please raise the red-flag. This stock is perhaps another good example of how you can make money trading within the range. Stay tune for the next part of investing dividend yield stocks to make money out of it.

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If I am allowed to give my personal opinion here, this is what I firmly believed ( & still do).

Studied the 6/42 & 6/49 games since 1999& I had a hunch the games are "fixed". I also studied the "billboards' of ST outlets which displayed the "winning tickets" – on one occasion, ST claimed in its "story' how a lucky winner picked the 6 lucky nos. & went on to win a huge sum. When I studied the winning ticket, I saw that the winner won the "winning numbers" via Lucky Pick.

How do you distinguish between "picked numbers" and "Lucky Picks" generated by the computer? If it's Lucky Pick, it will have "LP" next to the generated numbers.

So after that, I believed probably 95% of the stories on their "news bulletin" may be false but punters' belief that some day, one shall get lucky too keep the revenue going up!

I think even a machine can be rigged to avoid 'winning numbers combinations". Can anyone comment on the above suspicion?

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