Overall a Very Good Quarter

We are maintaining our BUY call on Genting Berhad (GENT) with a higher TP of RM12.80, as we incorporate the latest forecast for its subsidiaries, and its latest capital structure. 1QFY18 headline PATAMI of RM603m (-9% yoy) is above our expectations but in line with consensus expectations. The decline in PATAMI is not a true reflection, as the profit in 2017 has included a disposal of a non-core asset by its subsidiary. Adjusted 1Q18 EBITDA (ex-gain) is up 21% yoy.

No Change to Vegas Timeline

Management has indicated that its Las Vegas project is still on track for operations by end of 2020, as construction work has already started on site. There are also no changes to the current capex projection for it.

Improving Non-core Supplements Gaming Operation

There is also an increase in EBITDA contribution from its non-core business segment, Power and O&G. The improvement in the power segment was due to the commencement of its Banten coal-fired plant in Mar’17, and the higher oil price during the quarter, which has helped lift the O&G earnings as well. The reduction in forex losses by RM44m has also help to boost profit for the quarter.

Maintain BUY With a Slightly Higher TP of RM12.80

We are maintaining our BUY call on GENT with higher RNAV-based 12- month TP of RM12.80 (from RM12.70), as we incorporate the latest fair value of its listed subsidiaries – GENS, GENM and GENP (Genting Plantations). GENM is our top pick in the gaming sector, as we believe the opening of the theme park by year-end would be a re-rating catalyst for the stock. Nevertheless, GENT’s valuation remains attractive, as the holding co discount is still above the +1 Stdev of its historical average.

Risks to Our Call

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

Source: Affin Hwang Research - 25 May 2018