BToto pays out another hefty dividend

BERJAYA Sports Toto Bhd (BToto) showed why it is widely regarded as one of the best defensive stocks on Bursa Malaysia when on Dec 9 it declared a second interim dividend of 12.5 sen per share. This brought the total gross dividends for the first half of financial year ending April 2006 to 25 sen. 

Based on last Wednesday's closing price of RM4.44, the FY06 dividends so far already represent a net yield of 4%, which is decent by most standards. 

However, observers are sure that the numbers forecast operator would not stop at that. For one thing, it made four dividend payments for FY05, amounting to 45 sen gross. In addition, the company has a dividend policy of distributing at least 75% of its annual net earnings to shareholders. 

According to Reuters Estimates, the consensus estimated total gross dividends for the current financial year is about 48 sen. 

That works out to a net yield of more than 7%. However, it is probable that one or two research houses have factored in their expectations of a second capital repayment exercise early next year. This has somewhat inflated the consensus figure. 

(Three months ago, BToto shareholders enjoyed a windfall of 50 sen cash per share when the company undertook a capital distribution. BToto has said it would distribute surplus funds – via a proposed second capital repayment, also at 50 sen per share – to shareholders after Berjaya Land Bhd (BLand) had settled its inter-company debt with BToto.) 

Most other research outfits have projected total gross dividends of between 30 and 40 sen, which would lead to net yields of between 4.9% and 6.5%. With such numbers, BToto is a clear yield leader among gaming stocks.  

As such, it is not surprising that most research houses have a “Buy” on the stock, with BToto's attractive dividends as one of the main reasons. 

There are, of course, other factors that analysts rely on to explain why they fancy BToto. In its report last Monday, Mayban Securities upgraded the stock from a “Trading Buy” to a “Buy” to take into account the improved average payout and sales enhancement from the 4-Digit I-Perm game, which was launched last September. 

The proposed second capital repayment is also set to spark a surge in the share price. A possible turning point, according to observers, is the completion of BLand's disposal of its BToto shares to Intan Utilities Bhd. The proceeds will be used to pare down BLand's amount due to BToto. 

The ex-date of the second interim dividend for FY06 is Dec 28. The payment will be made on Jan 12.