Investment Highlights

• Maintain HOLD on Genting Malaysia (GenM) with an unchanged fair value of RM5.45/share.

• GenM's 1HFY18 results were within our expectations but below consensus estimates.

• The group’s EBITDA rose by 24.4% YoY to RM1.2bil in 1HFY18 driven mainly by the Malaysia unit. The 23.3% YoY increase in the EBITDA of the Malaysia division compensated for a 47.0% YoY drop in the earnings of the UK unit in 1HFY18.

• The Malaysia division benefited from an improved luck factor in the casino segment in 1HFY18. Recall that in 2QFY17, GenM’s casino division in Malaysia was hit by a low win percentage in the premium mass customer segment. We believe that gaming accounted for 85% of the Malaysia division’s revenue in 1HFY18 while non-gaming segments such as food and beverage and hotel made up the balance 15%.

• On a negative note, volume of VIP business at Resorts World Genting, Malaysia declined by 6% YoY in 1HFY18 and 21% YoY in 2QFY18. Volume of mass market business was flat YoY in 2QFY18. We understand that the FIFA World Cup affected the volume of casino business in 2QFY18.

• VIPs accounted for 43% of gross gaming revenue in Malaysia in 1HFY18 (1HFY17: 41%) while mass market made up the balance 57% (1HFY17: 59%).

• EBITDA of the UK unit plunged by 47.0% YoY to RM60.1mil in 1HFY18 dragged by lower volume of the premium business and a decline in the recovery of bad debts. We believe that consumer sentiment in the UK is weak due to Brexit.

• Losses at Resorts World Bimini, Bahamas narrowed from US$26.6mil in 1HFY17 to US$15.4mil in 1HFY18 due to a cost rationalisation exercise. On a positive note, revenue of Resorts World Bimini improved from US$12.7mil in 1HFY17 to US$13.1mil in 1HFY18 due to higher visitor arrivals. Resorts World Bimini is expected to break even only at the end of FY19F.

Source: AmInvest Research - 30 Aug 2018