- Maintain HOLD on Genting Malaysia Bhd (GenM) with a higher RNAV-based fair value of RM4.45/share vs. RM4.30/share previously. We have reduced the holding company discount on GenM’s RNAV from 10% to 8%. GenM’s RNAV implies mainly a FY16F PE of 18x on the earnings of the leisure and hospitality division in Malaysia.

- GenM’s 9MFY15 results were within our expectations but below consensus estimates. The group’s Malaysia division performed well in 3QFY15 as EBITDA margin improved from 32.5% in 2QFY15 to 37% in 3QFY15. EBITDA of the Malaysia unit climbed from RM420.9mil in 2QFY15 to RM521.4mil in 3QFY15.

- However, the UK and Bahamas divisions recorded losses in 3QFY15. The UK unit continued to bleed with a loss of RM86.9mil in 3QFY15 compared to a loss of RM99.9mil in 2QFY15. Resorts World Bimini, Bahamas was also in the red with a loss of US$19mil in 3QFY15 and a loss of US$50mil in 9MFY15.

- We understand that GenM’s Malaysia division has been increasing the productivity of its staff through cost rationalisation. Also, the group has been data-mining its customer network so that it can tailor products and offerings to the customers’ needs. This contributed to the 9% QoQ expansion in revenue and 23.9% QoQ improvement in EBITDA of the Malaysia unit.

- Number of visitors at Resorts World Genting improved by 7% YoY to 14.4mil in 9MFY15. Number of visitors at the highlands resort was flat QoQ at 4.9mil in 3QFY15. Volume of VIP and mass market businesses at Resorts World Genting improved by single-digit percentage YoY in 9MFY15.

- The London casino unit recorded a negative EBITDA of 19mil pounds in 3QFY15. Revenue of the London unit fell by 98% YoY in 3QFY15 due to declines in the volume of business and casino win rate. We understand that the London casino division was affected by a 20% contraction in the volume of business due to the anti-corruption crackdown in China.

- EBITDA of Resorts World New York (RWNY) expanded by 14% YoY in 9MFY15 due to higher average daily win per machine and lower payroll costs. Average daily win per machine at RWNY was US$452 in 9MFY15 versus US$442 in 9MFY14.

- We understand that it is still too early to assess the impact of Resorts World Birmingham as it was only opened last month.

Source: AmeSecurities Research - 27 Nov 2015