Investment Highlights

• Maintain SELL on Genting Bhd with a lower RNAV-based fair value of RM9.65/share vs. RM9.86/share previously. We have lowered Genting Bhd's 1QFY17 net profit by 7% to account for Genting Malaysia's (GenM) weaker earnings and a higher minority interest at Genting Bhd's level. Genting Bhd is currently trading at FY17F fully diluted PE of 23.5x and FY18F fully diluted PE of 23.0x.

• Genting Bhd’s 1QFY17 core results were below our earnings forecast and consensus estimates as GenM's net profit was below expectations. Included in Genting Bhd's results was Genting Singapore's (GenS) exceptional gain of S$96.3mil on the disposal of its stake in Resorts World Jeju.

• Malaysia accounted for 36.3% of Genting Bhd's leisure and hospitality EBITDA in 1QFY17. This was followed by Singapore (56.3%), the UK (4.9%) and US (2.6%).

• The number of Chinese visitors at the hotels at Resorts World Genting, Malaysia fell by 9% YoY in 1QFY17. We understand that GenM chose to sell more hotel rooms to its WorldCard members instead of the Chinese visitors during the Chinese New Year period. GenM's strategy is to improve its revenue yields by selling hotel rooms to customers who can spend more. About 73% of the hotel rooms at Resorts World Genting were sold to Worldcard members in 1QFY17.

• We also gather that the outdoor theme park at Resorts World Genting would open in 2QFY18. GenM is currently designing the rides of the theme park. The indoor theme park, which would be located at First World Hotel, is expected to open in FY18F.

• The VIP section of the Sky Casino at Resorts World Genting is expected to open in 3QFY17. We understand that there have been improvements in the mass market business since the opening of the Sky Casino in March 2017.

• GenM has started cost rationalisation initiatives at Resorts World Bimini, Bahamas. The group is also tying up with airlines and ferry operators to bring in more visitors into Resorts World Bimini. GenM is targeting the premium mass players at Resorts World Bimini as the market segment is less volatile than VIP.

• On the back of the initiatives, Resorts World Bimini is expected to record smaller losses in FY17F. We have forecast losses at Resorts World Bimini to decline from RM372.5mil in FY16 to RM300mil in FY17F.

Source: AmInvest Research - 30 May 2017