Results

• Above expectations: FY17 revenue of RM20.0bn and core PATAMI of RM2.4bn (+52.1% YoY), accounting for 114.4% and 117.9% of HLIB and consensus full year estimates, respectively. However, EBITDA was broadly in line.

Deviation

• The deviation at bottom line was mainly due to MI and lower than-expected taxation.

Dividends

• Declared a special dividend of 7 sen (ex-date: 12 th Mar) and proposed a final dividend of 6 sen, bringing FY17 total dividend to 21.5 sen. (FY16: 12.5 sen)

Highlights

• QoQ: Revenue grew by 4.3% mainly attributable to higher contribution from Malaysia operations and power segment. Core PATAMI however, was down by 13.6% due to weaker performance from Singapore coupled with higher staff cost as well as lower minority interest.

• YoY: Revenue improved by 10.6% with higher contributions from all segments except for US operation. Core PATAMI was up by 87.7%, superior to the revenue growth thanks to higher contributions from Malaysia, Singapore, UK and power segment.

• FY17: Core PATAMI grew by 52.1% on the back of higher revenue (+9.0) attributable to growth from all segments, except Malaysia and UK operations. Malaysia operation was affected higher costs involved with premium business and opening expenses for GITP.

• Malaysia operation recorded lower margin due to lower win rate coupled with higher payroll and utilities costs related to opening of new GITP facilities. GenS continued to improve with higher volume of business better win rate and better efficiency.

• Operation in US was buoyed by growth at RWNYC with improved commission structure and lower operating loss from RWBimini. In UK, lower reported earnings were primarily due to lower revenue resulting from lower win rate and higher bad debt.

Risks

• 1) Regulatory risk; 2) Weaker hold percentage; 3) Pandemic breakouts; 4) Appreciation of RM; and 5) Cannibalisation from regional casinos.

Forecasts

• We incorporate revised forecast from its subsidiaries and higher contribution from Power segment leading to higher FY18/19 EBITDA by 2.8%/2.6%.

Rating

• BUY ↔ , TP: RM11.73

• We believe GenT is the cheaper proxy to buy into GenM’s GITP growth and the turnaround of GenS. We see limited downside given its deep valuation and the unjustified holding company discount of >30% with its subsidiaries poised to fare better with cleaner slate moving forward.

Valuation

• Maintain BUY with lower target price of RM11.73 (from RM11.76) based on our SOP-derived valuation after incorporating lower TP for Genting Plantation ( HOLD, RM11.32 ).

Source: Hong Leong Investment Bank Research - 28 Feb 2018