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Monday, June 28, 2010

Berjaya Corp Scraps Ascot Buy; Shares Dive

KUALA LUMPUR (Dow Jones)--Investors beat shares of Berjaya Corp. Bhd. (3395.KU) down as much as 9% Monday, after the company said it has abandoned plans to buy 70% of Ascot Sports Sdn. Bhd. following the government's decision over the weekend to retain a ban on sports betting.

The government's decision is the latest in a series of bad news for the Malaysian diversified group, which has been publicly pinning its hopes on its venture into sports betting to boost growth.

In a statement, Berjaya Corp. said it has also scrapped a proposed rights issue to raise funds to buy the stake in Ascot.

The move comes after the government announced it won't issue a licence to Ascot to operate sports betting despite having earlier granted approval in principle to the company that is privately held by the family of tycoon Vincent Tan, who is also the chairman of Berjaya Corp. Berjaya Corp. planned to buy the stake worth MYR525 million from Tan.

The decision deals a major blow to Tan, who was counting on Ascot to be the first sports betting company in Malaysia and to, in turn, be a key earnings growth driver for his flagship listed holding company Berjaya Corp.

Berjaya Corp. said it was "extremely disappointed" that its sports betting ambitions have been "frustrated" by the government and sought to allay investor concerns over the group's growth prospects.

"Notwithstanding this backtracking by the government, the board remains resolute in its efforts to expand the company's portfolio of core business activities. The gaming sector will remain one of its primary focus for its high yielding potential," Berjaya Corp. said.

Prime Minister Najib Razak's administration had in recent months considered allowing legalized sports betting in a bid to curb illegal bookmaking in the country, which some estimates indicate is worth up to MYR10 billion a year. However, the move drew intense criticism from politicians from within the prime minister's own party and in the opposition, and from civil society organizations in this mainly Muslim country.

Najib was quoted by state news agency Bernama as saying that the government was maintaining its ban on sports betting after a survey showed most Malaysians were opposed to the activity.

At 0328 GMT, Berjaya Corp shares were down 7.4% at MYR1.26, after hitting an intraday low of MYR1.23, the lowest since Feb. 9. The benchmark Kuala Lumpur Composite Index was unchanged.

Analysts largely blamed the company for the dive in the share price, saying investors were likely punishing the company for raising market hopes that a venture into sports betting was imminent.

Such was Tan's confidence in clinching the licence that when Berjaya Corp. first announced the planned acquisition of a stake in Ascot in May, the tycoon made a guarantee that Ascot would make a profit of no less than MYR375 million in the first three years of operations.

"The group should not have drawn so much attention to itself without first securing a formal licence. This, coupled with other disappointing developments at the group recently, is hurting investor sentiment on the stock," said a gaming analyst, who asked not to be named, at a local bank-backed brokerage.

Last week, Berjaya Land Bhd. (4219.KU), the group's property arm, said it was no longer proceeding with an ambitious commercial and retail development project in Jeju island, South Korea, which it earlier estimated to be worth at least $200 million.

That announcement came just days after Berjaya Sports Toto Bhd. (1562.KU), the group's number forecasting games arm, reported a 25% year-on-year drop in its fiscal fourth quarter earnings, below market expectations.



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