Is Berjaya Sports Toto (BST) a Good Buy at RM5?

The Bursa was down for the last four days.

As I mentioned in an earlier posting,the contrarian players were nibbling about.

So I bought myself some BST at RM5.05. As the market was good this morning, it went up by 2 bits to RM5.15.

Now, let us discuss about BS. Is it a good buy at RM5?

The lowest of the year was RM4.04 and the highest was RM5.35. Before the recent special dividend announcements(both dividend and share dividend in specie), BST was floating about the RM4.68 price. Given today's price at RM5.10,this would mean an investor would have profited RM400 on paper not counting trading charges.

Let us build up a scenario when BST goes ex sometime in mid July. Let us assume that BST maintains the RM5 price cum dividends.

The dividend payout of RM300 will have to be off-set when BST goes ex on 13 July. That would mean the price would naturally be adjusted downward to RM4.70.

Then there is the share dividend distribution in specie. It is one share for every 14 held. At 1000 shares,this would work out to 71 shares. At an adjusted price of RM4.70, it will fetch a value of RM333 to the investor.

Since there is no additional shares on the market via this way of distribution,there will be no dilution in theory.

Again, as we all know, many will sell the new shares for a quick profit and this might destabilize prices for a while. However, the good news is that BST, depleted of its Treasury shares, may just end up in the market buying off these loose holders to bring back the price back to even keel at about RM4.70.

Final analysis:

Initial outlay : RM5,000
Returns by end of July: RM4,700 + RM300 + RM333 = RM5,333
We then minus RM100 as brokerage charges
Therefore returns is RM233

Benchmarked against the 2.5 % bank interest for fixed deposits, which will come to a return of RM10.70 per month,an investment return of RM233 in BST (for only a month) is far more superior than putting it in the bank!

Investing in BST is akin to theoretically putting money in the bank at 55% interest rate or a pro-rated monthly return 4.58%.