- Although Genting Malaysia Bhd’s (GenM) 9MFY14 results were below our expectations and consensus estimates, we are keeping our BUY recommendation on the group.

- GenM’s net profit growth is expected to resume in FY15F on the back of capacity expansion. This would be underpinned by the opening of 500 hotel rooms at Resorts World Genting at end-FY14F and 800 rooms by mid-FY15F.

- We have reduced GenM’s FY14F EPS by 6.4% to account for lower contribution from Resorts World Genting and Resorts World New York (RWNY). Our fair value for GenM has been adjusted downwards from RM5.10/share to RM4.90/share to reflect the earnings revision.

- After a poor 2QFY14, GenM’s core net profit rebounded by 10.4% QoQ to RM280.9mil in 3QFY14. This was mainly driven by the UK unit, which swung from a negative EBITDA of RM65.9mil in 2QFY14 to a positive number of RM145.6mil in 3QFY14.

- The UK division’s win percentage improved QoQ in 3QFY14. Also, there was an increase in the volume of business at the provincial casinos. Attendances at the UK casinos improved by 2% in 3QFY14 versus 3QFY13. Comparing 9MFY14 against 9MFY13, casino attendances were flat.

- Resorts World Genting’s EBITDA fell by 7.7% QoQ to RM412.6mil in 3QFY14 due to lower win percentage and higher costs for the VIP business. Normalising the win percentage, revenue of the Malaysia unit would have been flat YoY in 3QFY14 while EBITDA would have risen by 9%.

- RWNY’s EBITDA fell by 17% YoY in 9MFY14 mainly due to payroll costs, which increased by more than 10%. This was pursuant to the agreement with the labour union, which was signed in October 2013. Average daily win per machine at RWNY was US$442 in 9MFY14 compared with US$440 in 9MFY13.

- Resorts World Bimini’s loss widened from RM52.9mil in 2QFY14 to RM62mil in 3QFY14. The resort cum casino is expected to break-even in FY15F due to the opening of new hotel rooms in the middle of the year. The new jetty at Bimini Island opened in September 2014.

- GenM is hopeful that the winners of the casinos in upstate New York would be announced next month. However if the independent body in New York, which decides the winners, is not ready, then it would only be announced in FY15F.

- GenM recognised expenses of RM41.9mil in respect of its application for casino licences in upstate New York in 3QFY14.

Source: AmeSecurties