Results

• Within Expectations – Reported 1HFY15 core PATAMI of RM1.2bn came in within expectations, accounting for 58.5% and 61.8% of ours and consensus estimates, in view of GenS one-time tax refund.

Deviations

• Largely in line.

Dividends

• None (2QFY15: 1 sen). Management guided that dividend will be decided at the end of FY.

Highlights

• Gaming: Only Malaysia and US recorded yoy growth in 2QFY15 revenue from higher volume of business. US on the other hand experience growth on the back of the commencement of Resorts World Bimini since June 2013. Lower payroll costs in US resulted in a higher EBITDA while lower EBITDA in UK was due to higher bad debts written off.

• Non-gaming: The first offering for Phase 1, the new 1,300- room First World Hotel Tower 2A, is now fully opened. Other attractions and facilities of the GITP are expected to be opened in phases from the 2HFY16.

• GenT’s 1QFY15 power division earnings were higher mainly from the construction revenue of the 660MW coalfired Banten Plant in Indonesia. However, the adjusted EBITDA was lower due to lower generation by the Jangi Wind Farm.

• Plantation division revenue decreased yoy in 2QFY15 mainly due to lower palm products selling prices. Revenue from the Indonesia segment increased yoy due to higher FFB production. However, adjusted EBITDA was lower mainly due to softer palm product selling prices and the effects of yield dilution arising from the addition of new harvesting areas in Indonesia.

• Revenue and EBITDA from O&G division was contributed by the Chengdaoxi Block (CDX) 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 GenM (post-GenM results release on 26 August 2015). In turn, FY15-16 EPS is lowered by 11.4% and 9.5%, 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

• Upgrade from HOLD to BUY as share price plunged below fundamentals despite after we lower our SOP-derived TP by 2.1% from RM8.98 to RM8.79.

Source: Hong Leong Investment Bank Research - 27 Aug 2015