3QCY12 met expectations. Out of the four gaming companies, three reported 3Q12 results that were fairly in line with our expectations as well as that of the market except for Genting Malaysia Bhd ('GENM', OP; TP: RM4.19),  which beat our estimate on a lower-thanexpected taxation charge. Although  Genting Singapore Plc ('GENS', NOT RATED) and Genting Plantation Bhd ('GENP', UP; TP: RM8.30) reported poorer set of results earlier, we were surprised that parent company Genting Bhd ('GENTING', MP; TP: RM9.59) still managed to register 3Q12 results which met expectations. This was largely attributable to a stronger-than-expected GENM earnings. On the other hand, Multi-purpose Holdings Bhd's ('MPHB', OP; TP: RM4.31) 9M12 results made up 76% and 74% of our full year FY12 estimate and that of the market  consensus respectively. Meanwhile,  Berjaya Sports Toto Bhd ('BJTOTO', UP; TP: RM3.88) is likely to announce its 2Q13 results next Tuesday (18 Dec), which we expect to be free of any surprises. 

Better luck for NFO but not casino. Both the Malaysian and Singaporean casinos reported weaker top lines QoQ in 3Q12, due to poorer luck and lower business volume. The 3Q12 rolling chip win for RWS fell to 2.8%, the second lowest since the casino's inception in Feb 2010, from 3.1% in 2Q12. The market share for rolling chip volume also dropped to 47% in 3Q12 from 48% previously. In fact, the casino revenue  for GENS hit a new low, putting the casino revenues of both RWG and RWS closer to it. Elsewhere, Genting UK turned into a loss at the EBITDA  level  after  an  impressive  2Q12  as  poor  luck  factor  hit  hard  at  its  London  casinos together with an overall lower business volume. In New York, RWNYC's operation remained strong with its revenue sliding slightly only by 1% while the bottom line inched up 1% as net win gained 4% over the quarter. Meanwhile, MPHB saw improved luck in 3Q12 as its estimated prize payout ratio dipped slightly to 67.3% from 68.9% in 2Q12, although this was still way higher than that of 62.7% in 3Q11. MPHB's NFO sales dropped 1% QoQ but jumped 7% YoY.

Big cut in GENT's earnings.  Post-results, we saw a major earnings cut in GENT by 5% for FY12 by the consensus vs. 4% of ours. The anticipation is that there will be a mainly weaker GENS and plantation earnings in 4Q12. In addition, we have also trimmed FY13-FY14 estimates by 13% as we removed the Malaysian IPP contribution after the disposal was completed in Oct 2012 and also lowered our CPO price and GENS earnings projections. For GENM, in contrary to the consensus, which cut its FY12 earnings by 2%, we instead have upgraded our estimate by 5% as we lowered our effective tax rate to 23% from 26% previously. We have also upped our FY13-FY14 estimates by 2% after lowering its effective tax rate to 25% from 26% previously. On the other hand, while we kept our forecast unchanged for MPHB, we saw the consensus cut FY12 EPS forecast by 3%. 

Downgrade to NEUTRAL.Following our downgrade of GENTING to a MARKET PERFORM post its 3Q12 results, we are now downgrading our sector call to NEUTRAL from an OVERWEIGHT previously. Our gaming portfolio however still shows an upside potential of 9% after the rating cut in the above heavyweight. In summary, we prefer NFO plays over casino stocks given the former's near-term catalyst  in the form of ongoing corporate exercises compared to the latter, which have little price and earnings catalysts in the near term. Thus, MPHB remains as our TOP PICK for the gaming space for its re-rating story. For casino operators, we prefer GENM over GENTING given the resilient Malaysian earnings and as the latter is exposed to the downside of CPO prices and earnings risk from GENS. BJTOTO meanwhile remains a SELL as the listing of STM-Trust will likely lead to a de-rating of the stock.

Source: Kenanga