Period 3Q13/9M13

Actual vs. Expectations At 74% of our full-year FY13 estimates, the 9M13 core net profit of RM1.19b came in within our estimates but below market consensus at 70% only.

Dividends  No dividend was declared in 3Q13, as expected.

Key Results Highlights  The 3Q13 core earnings contracted 17% QoQ to RM395.6m from RM478.4m previously, mainly due to: (i) higher cost incurred by its Malaysian operations, (ii) lower business volume and hold percentage at its London casinos, and (iii) losses from the new USA unit, Resorts World Bimini (RWB).

 The Malaysian operations reported adjusted EBITDA, which declined 13% QoQ to RM475.5m on the back of a 2% slide in revenue. This was attributable to Resorts World Genting, which incurred higher cost for VIP business while the higher payroll arising from the minimum wage policy effective 1 July also crimped profitability. The closure for the theme park for a make-over also dragged down its non-gaming unit.

 The UK operations saw its 3Q13 adjusted EBITDA fell 44% QoQ to RM40.8m as revenue contracted 20% over the quarter. This was mainly driven by lower business volume and hold percentage at its London operations, although there were GBP12m bad debts being written-off in 2Q13.

 Despite revenue rising 10%, the USA operations adjusted EBITDA plunged 52% QoQ to RM41.2m, EBITDA level from RWB. Without RWB, Resorts World New York City (RWNYC) recorded a 7% QoQ hike in adjusted EBITDA. Nonetheless, the average daily win per machine for RWNYC dropped slightly to USD440 in 3Q13 from USD443 in 2Q13.

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 Downgrade to MARKET PERFORM from OUTPERFORM as the share price has performed well in the past three months.

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

Risks to Our Call Unfavourable luck factor.

Source: Kenanga