Investment Highlights

• We are keeping our HOLD recommendation on Genting Bhd with an unchanged RNAV-based fair value of RM9.40/share. Genting Bhd is currently trading at FY18F fully diluted PE of 22.7x and FY19F fully diluted PE of 20.1x.

• Genting Bhd has declared a gross DPS of 13 sen for 4QFY17, which brings total gross DPS to 21.5 sen for FY17 (FY16: 12.5 sen). We have forecast a gross DPS of 22.5 sen for FY18F, which implies a yield of 2.5%. Genting Bhd has received higher dividends from its subsidiaries i.e. Genting Plantations, Genting Malaysia and Genting Singapore in FY17. Hence, Genting Bhd is returning these dividend cash flows to its shareholders.

• Genting Bhd's FY17 net profit was below our earnings forecast and consensus estimates due to a RM308.8mil impairment in 4QFY17. The impairment loss was in respect of a life sciences company, which is in the process of being wound up. Operationally, Genting Bhd's EBITDA improved by 6.7% in FY17 mainly underpinned by Genting Singapore's (GenS) earnings recovery. Recall that GenS recorded lower impairments on trade receivables and a higher volume of casino business in FY17.

• In respect of Resorts World Las Vegas (RWLV), Phase 1 is estimated to cost about US$3.0bil to US$3.5bil. So far, Genting Bhd has spent about US$200mil on the project. RWLV will only formally apply for a casino licence from the authorities in Nevada when the property is ready by FY20F/FY21F.

• Genting Bhd is expected to carry out another round of fund-raising for RWLV. Hence if the group's 658.4mil warrants are not fully converted by end-FY18F, this would not be an issue as Genting Bhd has never intended to use the warrants proceeds to finance RWLV. So far, only 18% of the warrants has been exercised.

• In Malaysia, Genting Malaysia plans to focus on attracting visitors from China and Singapore to Resorts World Genting. This is expected to be easier when the indoor and outdoor theme parks are opened at Resorts World Genting by end-FY18F. Foreign hotel visitors at Resorts World Genting rose by 6% YoY in 4QFY17. Hotel visitors from China improved by 2% YoY in 4QFY17 while hotel visitors from Singapore increased by 9%.

• So far, 80% of the budgeted cost of RM10.4bil (Phase 1 and Phase 2) has been spent for the Genting Integrated Tourism Project at Resorts World Genting, Malaysia. For Phase 2 of the project, GenM may build another hotel at Resorts World Genting. This is because the average hotel occupancy rate was a high 95% in FY17. Average room rate was RM92/night in FY17.

Source: AmInvest Research - 28 Feb 2018