Results

Within Expectations – Reported 9MFY13 core PATAMI of RM2.26bn came within expectations, accounting for 75.2% of HLIB’s full year forecasts. Against consensus, GenT’s results were above expectations (84.7% of full year earnings).

Deviations

None.

Dividends

None.

Highlights

Gaming: YTD, all casinos (Malaysia, Singapore, US and UK) recorded growth in revenue largely from the expansion in volume of business in premium players segment. EBITDA-wise, Malaysia, Singapore and UK were down due to higher costs (lower margins) as well as higher bad debt written off (UK).

Non-gaming: Hospitality in Resorts World Genting was affected due to lesser arrivals of visitors arising from the closure of its outdoor theme park in Sept 2013. On the other hand, non-gaming division in Singapore continued to experience healthy growth from both its Universal Studio Singapore (USS) and Marine Life Park (MLP). The construction of the new hotel in the Jurong Lake District is progressing on schedule. Piling works are scheduled to complete soon, followed by super-structure work before year-end.

GenT’s power division recorded higher revenue and earnings YTD from higher dispatch from China power plant, construction revenue from the progressive development of the Banten plant in Indonesia and lower coal prices.

Revenue from plantation division was lower due to weaker palm product selling prices despite improvement in FFB production. EBITDA decreased further due to lower revenue despite input costs being well contained for 9MFY13 due to higher crop yields.

The O&G division has discovered gas from the drilling of additional wells in Indonesia. The division is continuing with seismic survey, the drilling of new prospects and the drilling of appraisal wells to prove up more reserves.

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

None.

Rating

BUY

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

Recommendation and TP remained unchanged at BUY and RM11.35 based on SOP valuations, respectively.

Source: Hong Leong Investment Bank Research - 29 Nov 2013