Results

• Below Expectations – Reported 9MFY14 core PATAMI of RM1.3bn came in below expectations, accounted for only 66.6% and 66.4% of ours and consensus full year earnings.

Deviations

• Mainly due to weaker-than-expected performance from Genting Singapore.

Dividends

• None.

Highlights

Gaming: All casinos except in Malaysia recorded growth in YTD revenue from higher volume of business in VIP segment (Singapore and UK). US on the other hand experience growth on the back of the com mencement of Resorts World Bimini in June 2013.

EBITDA-wise, higher payroll costs in Malaysia and US as well as operation challenges in Bimini have resulted in lower division EBITDA which was partially offset by higher EBITDA in Singapore (higher average hold rate) and UK (higher revenue and lower bad debts written off).

Non-gaming: Hospitality in Resorts World Genting was affected due to lesser visitors arising from the closure of its outdoor theme park. Non-gaming revenue in Singapore was rather flattish as we believe this was due to diminishing novelty effect of its Marine Life Park.

GenT’s 9MFY14 power division earnings only came from its Banten power plant in Indonesia while 9MFY13’s power division includes revenue from Meizhou Wan Power Plant in China. Profit from Meizhou Wan has been reclassified as discontinued operations following the disposal of 51% stake in Fujian Pacific Electric Co Ltd.

Plantation division revenue increased yoy mainly due to stronger palm product prices and higher FFB production in both Malaysia and Indonesia. Consequently, adjusted EBITDA grew further from lower fertilizer expenditure in Malaysia and the commissioning of 2 nd palm oil mill in Indonesia.

Revenue and EBITDA from O&G division was contributed by Genting CDX (57% participating interest by Genting CDX Singapore Pte Ltd) in China.

Risks

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

Forecasts

• We imputed the latest earnings revision from GenS and GenM and as such, FY14-16 EPS are cut by 12.7%, 2.6% and 4.9% respectively.

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

• Post-earnings revisions, TP is cut slightly to RM10.64 (from RM10.81) based on SOP valuations. Maintain BUY.

Source: Hong Leong Investment Bank Research - 24 Nov 2014