-  Maintain BUY on Genting Bhd with a higher RNAV-based fair value of RM11.40/share. The new RNAV accounts for Genting Malaysia Bhd’s (GenM) new fair value of RM5.10/share versus RM4.30/share previously.

-  Genting Bhd completed the sale of its 51% stake in Meizhouwan Power Plant in China in July 2014. We estimate the gain on the disposal at RM128.6mil. Due to the disposal, Meizhouwan’s earnings would no longer be consolidated from 2HFY14 onwards.

-  Going forward, Genting Bhd’s exposure to the power sector would be via its 49% shareholding in Meizhuowan and US$1bil coal-fired Banten Power Plant in West Java. Banten Power Plant is targeted for completion in FY16F and commissioning in FY17F.

-  In respect of Genting Bhd’s acquisition of 52,000ha of plantation land in West Papua for RM196mil, we understand that the landbank is next to the group’s Kasuri oil and gas block.

-  The rationale of the acquisition is to protect Genting Bhd’s interest in its oil and gas venture at Kasuri.

-  Genting Bhd’s 1HFY14 core net profit was below our earnings forecast mainly due to GenM’s weak profitability. We have reduced Genting Bhd’s FY14F EPS by 6.2%. The downward revision in GenM’s earnings is partly offset by the upward adjustment in Genting Singapore’s (GenS) numbers.

-  GenM’s net profit contracted by 30.4% YoY to RM612.7mil in 1HFY14 on the back of losses in the UK and Bahamas casino units.

-  Genting Bhd reported a 10% YoY increase in EBITDA in 1HFY14, underpinned by an 11% revenue growth.

-  The expansion in EBITDA was driven by GenS’ 32.6% jump in earnings and plantation, which achieved a 131.2% profit growth.

-  Leisure and hospitality accounted for 92.5% of Genting Bhd’s EBITDA while plantation accounted for another 6.9%.

-  In the leisure and hospitality division, GenS accounted for 59.6% of the unit’s EBITDA in 1HFY14. This was followed by the Malaysia unit (38.7% of EBITDA), the UK (0.3%) and the US (1.4%).

Source: AmeSecurities