We are maintaining our BUY call on Genting Berhad (GENT) with a higher TP of RM12.77, as we have revised higher our EPS forecast for FY17E-19E by 19-25%, given the better performance from its Singapore operation and its power business. 1H17 PATAMI at RM1,059m is above our expectations but inline with consensus. Management also announced an interim dividend of 8.5sen, which came as a surprise, as the last interim DPS was announced back in FY14.

Upgrades Are Due to Genting Singapore

The upgrades for GENT are mainly derived from its core listed subsidiary Genting Singapore (GENS SP), as we have upgraded the fair value to S$1.32. We are bullish on the outlook post the management decision to extend credits to its VIP patrons, which can help to drive growth that was lacking over the past few years. The higher dividend payout for both interim and final could also lead to a potential higher payout for GENT.

Higher Payout Is Likely to Stay

We believe that GENT’s interim dividend payout is sustainable, given GENS decision to maintain an interim dividend payout and also the higher interim payout from GENM and GENP. This is inline with management’s guidance, as they are committed to distribute most of the dividends received from its subsidiaries back to GENT’s shareholders. Although the dividend yield is unexciting at 1.7%, it would help to lower the current holding co discount gap, which is at +1 stdev of its historical average.

Maintain BUY With a Higher TP at RM12.77

We are keeping our BUY call on GENT with a higher TP at RM12.77, mainly due to the upgrades from GENS. GENT is still our top pick in the gaming sector, as it is a cheaper alternative to benefit from the upside of its other listed subsidiaries, Genting Malaysia and Genting Singapore.

Risk to Our Call

Key downside risk to our call include: 1) Further delays to the opening of theme park; 2) Fewer-than-expected high-roller arrivals, and 3) Unfavourable luck factor

Source: Affin Hwang Research - 25 Aug 2017