Period  2Q13/1H13

Actual vs. Expectations  Genting Malaysia (“GENM”) reported 1H13 core net profit of RM790.9m which is in line with our and consensus full-year forecasts, at 49% and 47% fulfilment rates respectively.

Dividends  A 4.3 sen GDPS was declared in 2Q13 which is higher than the 3.8 sen GDPS paid in 2Q12.

Key Results Highlights  QoQ, core net profit jumped 53% in 2Q13 to RM478.4m from RM312.5m in 1Q13, mainly due to higher: (i) local revenue: and (ii) business volume and hold percentage at its London casinos; while the Malaysian operations were hit by higher corporate social responsibility costs in 1Q13.

 The local operations posted a 37% QoQ hike in the adjusted EBITDA to RM549.0m as the higher operating expenses and contributions in support of social responsibility efforts incurred in 1Q13. Meanwhile, the casino operations reported singledigit growth in 1H13 revenue on higher business volume and a higher hold percentage in the VIP business.

 The UK operations adjusted EBITDA surged 2-fold QoQ to RM72.8m, thanks to its Londonbased casinos registering higher business volume and hold percentage. However, the London casinos were also hit by higher bad debts written off amounting to GBP12m in 2Q13.

 In the USA operations, 2Q13 adjusted EBITDA rose 5% QoQ to RM85.1m, as RWNYC posted higher business volume which offset higher preoperating expenses (RM25.3m vs. RM5.3m) arising partly from the Resorts World Bimini (“RWB”) opening in Bahamas. The average daily win per machine for RWNYC improved to USD443 in 2Q13 from USD416 in 1Q13.

Outlook  The 5-year refurbishment program worth RM3b for RWG and the newly acquired RWB could be the new earnings catalysts to GENM. On the other hand, the yield management initiative should help to improve earnings while the RWNYC numbers should be sustainable.

However, the UK operations could continue to see tougher times due to its VIP-centric nature.

Change to Forecasts  We keep our FY13-FY15 estimates unchanged.

Rating   Maintain OUTPERFORM

Valuation  Our target price is maintained at RM4.39/SOP share.

Risks  Unfavourable luck factor.

Source: Kenanga