Results

• Above Expectations – Reported 1QFY15 core PATAMI of RM718.9m came in above expectations, accounting for 34.5% and 35.4% of ours and consensus estimates.

Deviations

• The below expectations results from Genting Singapore (GenS) was more than offset by the lower-than-expected minority interests.

Dividends

• None.

Highlights

• Gaming: All casinos except Singapore and UK recorded yoy growth in 1QFY15 revenue from higher volume of business in VIP segment. US on the other hand experience growth on the back of the commencement of Resorts World Bimini in June 2013. Higher payroll costs in Malaysia resulted in a lower EBITDA while lower EBITDA in UK was due to higher bad debts written off. EBITDA in US improved as payroll costs came in lower, coupled with lower losses in Resorts World Bimini (RWB) in Bahamas.

• Non-gaming: Hospitality in Resorts World Genting saw an increase in revenue upon the opening of ~400 rooms in First World Hotel Tower 2 Annexe. Non-gaming revenue in Singapore declined due to lower tourist arrival to the resort.

• GenT’s 1QFY15 power division earnings was lower yoy, attributable to lower generation from its Jangi Wind Farm, as well as lower construction revenue of its Banten plant in Indoenesia.

• Plantation division revenue decreased yoy in 1QFY15 mainly due to lower palm products selling prices and lower FFB production in Malaysia, which more than offset the higher FFB production in Indonesia. EBITDA came in lower as well due to the combined impact of weaker palm products selling prices as well as lower FFB yield which pushed up unit costs of production.

• 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 factored lower earnings from GenS (post-GenS results release on 14 May 2015) adjusted deviation in minority interests, FY15-16 EPS is lowered marginally by 2.5-5.1%.

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

Post-earnings revision, TP is lowered by 4.6% to RM8.98 from RM9.42 based on SOP valuations. Our HOLD recommendation on the stock remains unchanged.

Source: Hong Leong Investment Bank Research - 29 May 2015