Friday, 6 May 2016

Berjaya Corp (1) - Strikes Gold In Vietnam. Time To Revisit

Author: Icon8888   |   Publish date: Wed, 10 Feb 2016, 09:41 PM 

(Past 5 years)

(Past 1 year)

On 20 January 2016, Berjaya Corp announced that it has been officially awarded by the Vietnamese Government the exclusive right to invest in and operate a nationwide computerized lottery in Vietnam for 18 years

The project will be implemented via subsidiary Berjaya GTI.
BJCorp and Bursa listed Berjaya Sports Toto will own effective interest of 40% and 10% in Berjaya GTI respectively. The remaining approximately 50% is owned by Vietnamese Government.

The project is the result of competitive bidding among five international gaming companies. Berjaya GTI will roll out the first game in mid 2016 and targets to finish setting up the entire network comprises 10,000 terminals within a period of 5 years

The entire project is expected to cost USD211 mil (RM919 mil).

Concluding Remarks

(a) Due to lack of focus, erratic earnings, inefficient assets utilization and other factors, BJCorp has over the years fallen off the radar of investors. In my opinion, many people have not noticed this latest corporate development. We are still at early stage of price discovery. 

(b) Malaysia has a population of 30 mil and 3 major number forecast operators (and numerous illegal operators). I don't have the exact market share of Berjaya Sports Toto. However, let's just assume its market share is 40%. That will translate into 12 million population. Based on that market share, Berjaya Sports Toto generated average net profit of RM367 mil per annum over past 5 years. 
Based on BJCorp's 40% effective interest in Berjaya GTI and Vietnam's 90 mil population, pro forma market share is 36 mil people, 3 times that of its market share in Malaysia.
Based on 2013 figures, Vietnam's GDP per capita was approximately USD2,000, 20% of Malaysia's GDP per capita of approximately USD10,000. There is plenty of room for growth.

(c) As shown in the chart above, at current price of 40 sen (market cap of RM2 billion based on 5 billion shares), BJCorp is trading at trough valuation. The lowest price registered was in January 2016 when it traded at 34 sen. 
Berjaya GTI will roll out its first game in mid 2016. Should we buy now or should we wait for the new earning stream to trickle in ? Unfortunately, nobody has the answer for that. We all have to make our own decision. 


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