Investment Highlights

• Maintain HOLD on Genting Malaysia (GenM) with an unchanged fair value of RM5.45/share. GenM is currently trading at FY18F PE of 23.0x and FY19F PE of 20.0x.

• GenM's 1QFY18 results were above our expectations but below consensus estimates. EBITDA of the Malaysia division was stronger than expected in 1QFY18 underpinned by an increase in the volume of casino business.

• In spite of this, we are keeping GenM’s net profit forecast for now as operating expenses may rise in 2HFY18. GenM would be expanding its workforce in 3QFY18 and 4QFY18 in preparation for the opening of the 20th Century Fox World theme park at end-FY18F. The indoor theme park at Resorts World Genting is expected to open in 3QFY18.

• EBITDA of the Malaysia division increased by 22.0% from RM437.4mil in 1QFY17 to RM533.7mil in 1QFY18. To recap, the mass market floor of the SkyCasino at Resorts World Genting opened in March 2017 while the premium mass floor opened in August.

• Due to the opening of the new casino floor space, the volume of VIP and mass market businesses in Malaysia rose by double-digit percentage YoY in 1QFY18. The VIP segment accounted for 44% of gross gaming revenue in Malaysia in 1QFY18 vs. 42% in 1QFY17.

• Number of visitors to the hilltop Resorts World Genting rose by 6% YoY to 5.1mil in 1QFY18. Day-trippers accounted for 74% of the visitors at Resorts World Genting in 1QFY18 while hotel guests made up the balance 26%.

• EBITDA of the UK unit dived by 60.6% from RM77.7mil in 1QFY17 to RM30.6mil in 1QFY18 due to declines in the volume of business and win rate.

• Volume of business of the casinos in London slid by 34% YoY in 1QFY18 while volume of business of the casinos at the provinces shrank by 10%. Resorts World Birmingham recorded a smaller loss of £0.4mil in 1QFY18 vs. £1mil in 1QFY17.

• In the Bahamas, Resorts World Bimini registered a decrease in losses from US$17.2mil in 1QFY17 to US$7mil in 1QFY18. Losses narrowed due to cost rationalisation in 1QFY18. Resorts World Bimini has been in the red since FY13.

Source: AmInvest Research - 25 May 2018