not vested
Within expectation
1Q core earnings accounted for 36% of our full year estimates
Deemed within expectation in anticipation of weaker quarters ahead
HOLD with RM2.45 TP
Highlights
Within expectation Within expectation
Core net profit of RM90.8m (+10% y-o-y; +48% q-o-q) accounted for 36% of our and consensus full year estimates.
Nonetheless, we deem the results to be within expectation given that:-
(1) this is a seasonally strong quarter. We expect slower ticket sales for the subsequent quarter given the weak consumer sentiment (post implementation of GST);
(2) prize payout ratio is estimated to be 61%, which is below its theoretical payout ratio of 63%; and
(3) Margins will be lower in the upcoming quarters with the full absorption of GST.
The group declared 5 sen DPS, which implies 78% payout ratio. Despite the lower than expected dividend payout, we are retaining our payout assumption of 85% for FY15,
implying 5.5% dividend yield.
Outlook
Earnings prospects unexciting due to weak consumer prospects unexciting due to weak consumer spending spending
Although we have imputed the GST impact onto our earnings model, we remain cautious that the group’s near term earnings prospects could be dragged by weaker
consumer sentiment post-implementation of GST.
Valuation
We maintain our HOLD recommendation for the group with TP of RM2.45, based on the dividend discount model and assuming:-
(i) 85% dividend payout ratio;
(ii) 7.3% cost of equity; and
(iii) 1% terminal growth rate.
Dividend yield of over 5% should continue to support the share price.
Risks
Declining revenue with rising competition and weak Declining revenue with rising competition and weak rising competition and weaker consumer sentiment consumer sentiment
Increased industry competition and weaker consumer sentiment could significantly impact ticket sales.
Source: Alliance DBS