-  Maintain BUY on Genting Malaysia Bhd (GenM) with an unchanged RNAV-based fair value of RM5.10/share. We have reduced GenM’s FY14F EPS by 10.1% as its net profit was below expectations and consensus estimates.

-  GenM is expected to open 500 hotel rooms at the extended First World Hotel by end-FY14F or early-FY15F. The balance 800 new hotel rooms are targeted for completion by mid-FY15F.

-  After the completion of the new hotel, GenM would be concentrating its efforts on finishing the new cable car line and theme park. We believe that the theme park would be opened in FY16F.

-  In New York, GenM would be presenting its two casino bids to the authorities on 9 September 2014. After that, there will be a dialogue between the two parties.

-  The winners of the upstate casinos are anticipated to be announced by end-FY14F instead of our earlier expectation of September or October 2014.

-  GenM’s weak performance in 2QFY14 was due to lower win percentage in the casino units in Malaysia and London. Also, losses at Resorts World Bimini widened from RM51.7mil in 1QFY14 to RM52.9mil in 2QFY14 dragged by infrastructure and hotel capacity constraints.

-  The casino division in the United Kingdom (UK) recorded a negative EBITDA of RM65.9mil in 2QFY14 against a positive RM76.3mil in 1QFY14.

-  Apart from a lower win percentage, the UK casino unit also chalked up declines in attendances of 8% in London and 3% in provinces. Write-offs of bad debts increased in 2QFY14 versus 1QFY14, but the amount was not disclosed.

-  In Malaysia, lower luck factor coupled with a decline in visitorship resulted in a 5.9% QoQ fall in EBITDA in 2QFY14. The number of hotel foreign guests fell 16% YoY in 1HFY14 led by a 19% contraction in the number of visitors from Singapore.

-  If the VIP win percentage was normalised, then revenue of the Malaysia unit would have been flat YoY in 1HFY14 while EBITDA would have risen by 7%.

-  Casino revenue in Malaysia declined by single-digit percentage points YoY in 1HFY14 due to the lower luck factor. Volume of VIP business slid double-digit percentage points while volume of business in the mass market segment improved a single-digit percentage points YoY in 1HFY14.

Source: AmeSecurities