- Following the downgrade in our recommendation and fair value for Genting Singapore PLC (GenS), our call on Genting Bhd has been reduced to HOLD from BUY. GenS accounts for more than a third of Genting Bhd’s RNAV.

- Our new RNAV-based fair value for Genting Bhd is RM10.35/share instead of RM11.40/share. The weaker fair value accounts for GenS’ and Genting Malaysia’s (GenM) lower target prices.

- Genting Bhd’s 9MFY14 results were below our earnings forecast and consensus estimates due to soft performances from GenS and GenM. We have brought down Genting Bhd’s FY14F net profit by 7.2% to account for these.

- Recall that GenS’ EBITDA fell by 19.9% QoQ in 3QFY14 due to a slide in the VIP win percentage. VIP volume of business also shrank by 9% QoQ in 3QFY14.

- The weaker performance from the casino units were cushioned by improved earnings from Genting Plantations and the oil and gas unit. GenP’s EBITDA expanded by 74.5% YoY to RM327.5mil in 9MFY14 on the back of higher CPO price.

- The oil and gas unit’s EBITDA of RM26.7mil in 3QFY14 was driven by Genting Bhd’s 57% shareholding in the Chengdaoxi Block, which is located in Bohai Bay, China.

- This is an oil producing field that is jointly operated by Genting Bhd and China Petroleum Corporation. The operations started in July 2014. We did not account for earnings contribution from this unit previously.

- We understand that the capex for Resorts World Las Vegas has not been approved by the Board of Directors yet. It is likely that the budget of the project would only be approved in FY15F. Construction would likely commence in FY16F.

- Currently, Genting Bhd is still reviewing the design of the project. The group is also talking to bankers to finalise the funding of Resorts World Las Vegas.

- GenS accounted for 56.3% of Genting Bhd’s leisure and hospitality EBITDA in 9MFY14. This was followed by the leisure and hospitality unit in Malaysia (39.0%), UK unit (3.5%) and US division (1.1%).

Source: AmeSecurities