- Maintain HOLD on Genting Malaysia Bhd (GenM) with an unchanged RNAV-based fair value of RM4.30/share.

- GenM’s 9MFY13 core earnings were within our expectations and consensus estimates, as a low effective tax rate helped offset weak earnings from Malaysia.

- GenM achieved a core net profit of RM1.2bil in 9MFY13, 8.3% higher than the RM1.1bil recorded in 9MFY12. The profit improvement was underpinned by higher EBITDA from “Resorts World New York” (RWNY) and a low effective tax rate of 10.3% in 9MFY13 compared with 26.3% in 9MFY12.

- EBITDA of the leisure and hospitality division in Malaysia fell by 7.7% YoY to RM1.4bil in 9MFY13 due to higher payroll and donation expenses. As a result, EBITDA margin of the Malaysia division fell from 37.6% in 9MFY12 to 33.7% in 9MFY13.

- GenM implemented minimum wage and signed a collective agreement with its workers on 1 July 2013.

- Volume of VIP business in Malaysia remained positive, rising by single-digit percentage YoY in 9MFY13. VIPs accounted for 40% of gaming revenue in 9MFY13 versus 37% in 1HFY12. Volume of business in the mass market segment was stagnant YoY in 9MFY13.

- In spite of the healthy casino business, the number of visitors at “Resorts World Genting” fell by 7% in 3QFY13 versus 3QFY12. This was due to the closure of the theme park. On a YoY basis, the number of visitors inched down 1% in 9MFY13.

- “Resorts World Bimini” recorded RM50mil loss and RM13mil revenue in 3QFY13. We understand that the resort at Bimini Island, Bahamas has yet to reach critical mass.

- In addition, there are challenges operating in the Bahamas such as adverse weather conditions. We gather that due to the current cold weather, it is difficult to bring visitors to the island as the sea waters are choppy.

- The new hotel and jetty at Bimini Island are forecast to be ready by 2QFY14. Until then, management would be monitoring the revenue and cost structure at Resorts World Bimini.

- GenM’s investment in Resorts World Bimini is expected to be US$250mil in total. The new hotel is estimated to cost US$70mil. 

Source: AmeSecurities