Journey to Wealth

Genting Malaysia - Strong on The Home Front

kiasutrader
Publish date: Fri, 30 Nov 2012, 10:06 AM

The group's annualised 9MFY12 results were in line with both consensus and our expectations. Its core gaming operations in Malaysia reported double-digit growth for VIP gaming and mid single-digit growth for mass market gaming but a partial drag  in  win  rates.  The  current  share  price  offers  an  excellent  opportunity  to accumulate, as its valuation is undemanding at 12.3x PE. Its stable domestic mass market gaming revenue, amidst such global macroeconomic uncertainty, is a key attraction. Maintain BUY, with the FV unchanged at RM4.21.

In line. The group's headline earnings were impacted by RM183.9m in impairments and RM48.2m  in  construction  cost  overruns  for  its  casino  in  the  US.  Adjusting  for  the abovementioned exceptional items, Genting Malaysia's annualised 9MFY12  core  net profit  met  expectations,  representing  74.8%  and  74.7%  of  consensus  and  our  full  year forecast respectively. The impairments were related to a write-down of goodwill from the acquisition of the Omni Centre in Miami, Florida, certain casinos and provincial casinos' assets in its UK operations and the carrying value of its casino concession agreement in Egypt.

Sequential  results  impacted  by  UK  casinos.  Given  Genting  Malaysia's high base of its preceding earnings  in  2Q12,  earnings  in  3Q12  declined by  25.4%  q-o-q  thanks  to  a drop  in  business  volume,  lower  luck  factor  and  some  bad  debt  write-offs  from  its  UK operations. This was largely expected as its UK casino operations  have benefitted from exceptionally strong win rates in 2Q12 which resulted in it registering EBITDA growth of 278% q-o-q and 141% y-o-y.

Malaysian  casino  ops  resilient.  The group's domestic gaming profit declined by a marginal  2%  as  a  result  of  higher  marketing  costs.  Revenue  was  up  2%  despite  lower win  rates  as  relatively  healthy  domestic  gaming  volume  growth  was  sufficient  to  offset the poorer win rates. The group's Malaysian  casino  operation,  comprising  the  bulk  of group  earnings  at  83%,  reported  double-digit  volume  growth  in  VIP  gaming  and  mid single-digit growth in mass market gaming. Meanwhile, overall visitor numbers rose 2% y-o-y as domestic day trippers continued to contribute the bulk of the total arrivals at a steady 74%. 
Source: OSK
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