Journey to Wealth
Genting Malaysia - OUTPERFORM - 31 May 2012
Period 1Q12
Actual vs. Expectations
Ex-EI, 1Q12 results came in within expectations, with core profit of RM374.9m making up 24% of our FY12 full year estimate and 23% that of the street's forecast.
The variance between core earnings and our estimate was due to unfavourable luck factor at its high-roller segment.
Dividends No dividend was declared as expected.
Key highlights
1Q12 headline net profit contracted 23% QoQ and 35% YoY, led mainly by the poor luck factor at RWG, cost overrun at RWNYC and bad debts at the London casinos.
Despite overall higher business volume, poor luck factor hit the Malaysia operation where its 1Q12 EBITDA dipped 14% QoQ and 13% YoY to RM462.0m.
Business volume at UK casinos were encouraging, but a GBP8m bad debts write-off for the London casinos sent its EBITDA lower by 38% QoQ and 55% YoY to RM34.5m.
RWNYC's full quarter results (launched in Oct 2011) helped USA operations to register an EBITDA positive of RM1.2m, although the results included a RM48.2m cost overrun at RWNYC and a combined RM25.1m pre-operating expenses for RWNYC and RW Miami.
Outlook FY12 would be a stronger year than FY11 as RWG's earnings continue to be resilient, a recovery of its UK operations are on hand as well as a full year earnings contribution from RWNYC.
Change to Forecasts
We have tweaked FY12-FY13 estimates by 4%-5% as we lowered the EBITDA margin assumption for RWG casino operations to 42% from 44% previously.
We have introduced our new FY14 forecast, where we expect net profit to grow at 5% p.a.
Rating MAINTAIN OUTPERFORM
Valuation We are rolling over our valuation base to CY13 from CY12, thus our new price target is RM4.18/SOP share from RM4.40/SOP share previously.
Risks Continued unfavourable luck factor.
Source: Kenanga
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