GenT’s 1H18 core PATMI of RM1.36bn (+18.2% YoY) was within ours but above consensus expectation. Declared an interim dividend of 8.5 sen per share. Stronger YoY results were driven by stronger performances from all business operations except for UK operations and plantation division. Maintain forecast and BUY rating with unchanged target price of RM12.27 based on SOP-derived valuation. GenT remains a cheaper proxy to buy into GenM’s GITP growth and the stability of GenS with likely limited downside given its huge holding discount.

Within expectations. 1H18 revenue of RM10.07bn translated into core PATMI of RM1.36bn which was within our expectation at 50.5% of full year forecasts but above consensus expectations at 55.2%.

Dividend. Declared an interim dividend of 8.5 sen per share (1H17: 8.5 sen) going ex on 19 Sept 2018, representing an annualized yield of 2.0% at current price.

QoQ. Revenue contracted by 8.1% in 2Q18 mainly due to lower performances from Singapore operation and plantation division, partially mitigated by better performance from US operations and power division. Similarly, core PATMI was also down by 20.3% on the back lower revenue with lower margin recorded from plantation division as well as unfavourable forex movement.

YoY. 2Q18 revenue was down by 2.6% while core PATMI was largely flat (+0.5%), mainly driven by weaker performances from all operations under leisure & hospitality, which was mitigated by leisure & hospitality in Malaysia (higher win rate and other non-gaming income) and oil & gas division (higher average oil prices).

YTD. Revenue rose 3.6% but core PATMI grew stronger by 18.2%, mainly driven by stronger performances from all operations under leisure & hospitality especially Malaysia; more than offset the weaknesses in UK (higher write off of bad debt) and plantation division (lower palm product prices and higher finance cost).

GenM. Higher 1H18 volume achieved in both gaming and non-gaming operations while EBITDA margin improved slightly at 33.7% from 31.2% thanks to higher revenue base, spurred by a robust 21% growth in number of visitors.

GenS. Overall better 1H18 was spurred by with higher volume and improved margin (low impairment of bad debt and operating cost).

GenP. Overall higher FFB production and turnaround at the downstream segment were more than offset by lower palm product prices and higher finance cost.

Outlook. Both GenS and GenM are expected to continue showing positive results, benefiting from overall improved visitors, higher gaming volume and stable margin, provide no huge swing in luck factor. GenP is also expected to come in stronger in 2H18 to on the back of higher FFB production, and lower CPO production cost.

Forecast. Unchanged as the results were in line.

Maintain BUY with unchanged target price of RM12.27 based on SOP-derived valuation. GenT continues to remain a cheaper proxy to buy into GenM’s GITP growth and the stability of GenS. We see limited downside given its deep valuation and the unjustified huge holding company discount of >30% with its subsidiaries poised to fare better with cleaner slate moving forward.

Source: Hong Leong Investment Bank Research - 30 Aug 2018