Results

In Line – Reported 1QFY13 core net profit of RM430.9m came below expectations. However, excluding the ~RM186.8m charity contributions, core net profit of RM617.7m came in line, accounting for 26.3% and 26.5% of ours and consensus full year forecasts.

Deviations

None.

Dividends

None.

Highlights

Group revenue declined by 2.8% yoy largely due to the lower revenue contribution from UK and Singapore casino operations.

Gaming Division: Volume contraction yoy in UK and Singapore operations were partially offset by the increase in volume from casinos in Malaysia and US.

Hospitality Division: The division in Malaysia and Singapore reported growth yoy on the back of higher occupancy rate. However, average room rate in Malaysia declined 3.5% vs. average room rate growth in Singapore of 19.6%.

Net wins in RWNY grew 15.8% to US$147/VLT/day compared to US$360 in 1QFY12. RWNY continues to drive its growth momentum by introducing busses to attract visitors from beyond the proximity of Queens County.

Management reaffirmed our view that the development of Resorts World Bimini Bay (RWBB) is an effort to expand GenM’s international coverage and help promote and strengthens its foothold in the region.

Plantation division’s EBITDA declined 36.7% yoy from lower interest income and higher losses at the biotech segment, which altogether more than offset lower losses at Indonesia operations.

Revenue from power division increased yoy due mainly to higher dispatch from the Meizhou Wan power plant and construction revenue generated from the progressive development of the 660MW coal-fired Banten plant. Consequently, EBITDA increased compared with the previous year’s corresponding quarter.

Risks

1) Regulatory risk; 2) Weaker hold percentage; 3) Pandemic breakouts; 4) Appreciation of RM; and 5) Higherthan- expected cannibalisation from Marina Bay Sands (MBS) and Macau casinos.

Forecasts

Unchanged.

Rating

HOLD

• Positives – (1) Defensive stock; and (2) New sources of earnings from international markets to drive earnings growth.
• Negatives – (1) Highly regulated industry; and (2) Leisure and hospitality’s earnings highly dependable on luck factor and hold percentage

Valuation

• Maintain BUY on GenT with unchanged TP of RM11.30 based on SOP valuation.

Source: Hong Leong Investment Bank Research - 31 May 2013