Results

• GEMT reported 9MFY15 core PATAMI of RM1.38bn. We consider the results within expectations, accounting for 76.6% and 79.6% of ours and consensus estimates.

Deviations

• -

Dividends

• -

Highlights

• Gaming: Malaysia operation was stable with healthy EBITDA margin of 35% and improved volume; offset by lacklustre performance from UK casino operations due to lower revenue from International Markets and higher bad debt written off.

• RWS revenue increased by 13% YoY mainly due to higher contribution from mass and premium mass coupled with favourable foreign exchange rate.

• Non-gaming: In Singapore, improvement in non-gaming revenue by 10% contributed from the newly opened Jurong Hotel with 557 rooms at 88% occupancy rate.

• Power division: 3QFY15 EBITDA was higher by 63.4% YoY derived mainly from the construction revenue of the 660MW coal-fired Banten Plant in Indonesia with improved contribution from Jangi Wind Farm in India.

• Plantation division revenue decreased 3% YoY in 3QFY15 mainly due to lower ASP for palm products and yield dilution from additional harvesting at higher manuring cost .

• Notably, EBITDA from ‘Investment and others’ division surged from RM41m to RM604m, mainly boosted by favourable exchange rate on non-MYR denominated assets due to depreciation of the currency.

• On Resorts World Las Vegas, management shared that they looking to conclude the plan details such as cost and financing by 1HFY16 and are looking to commence the business by 2HFY18.

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

• Unchanged

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

• Maintain HOLD with lower target price on our SOP-derived TP from RM8.79 to RM8.72 post adjustment of lower target price for its plantation division.

Source: Hong Leong Investment Bank Research - 27 Nov 2015