Period  1Q14

Actual vs. Expectations

 1Q14 results came in within our expectation with core net profit of RM361.3m which accounted for 23% of our full-year FY14 estimates but only made up 21% of consensus full-year estimates.

Dividends  No dividend was declared, as expected.

Key Results Highlights The 1Q14 core earnings contracted 10% QoQ to RM361.3m from RM402.2m previously, mainly due to: (i) lower revenue from Malaysian operations and (ii) drop in UK casino revenue which was partly mitigated by higher bad debts recovery. On the positive note, new start-up losses at Resorts World

Bimini (RWB) narrowed to RM52m from RM59m in 4Q13.

 The Malaysian operations reported adjusted EBITDA, which dipped 8% QoQ to RM502.5m on the back of

6% decline in revenue after a seasonally strong quarter in 4Q. The non-gaming segment continued to record lower earnings given the closure of its theme park for a massive make-over, but the impact was minimal to the group.

 In UK, the casino operations posted lower adjusted EBITDA by 17% as revenue slid 7% over the quarter given the lower business volume. However, it managed to recover higher bad debts compared to 4Q13.

 However, the North America operations reported better earnings with EBITDA of RM14.7m from loss of

RM21.2m which was helped by improved RWNYC number and narrowed losses at RWB as revenue rose 8%. The average daily win per machine for RWNYC recovered to USD432 in 1Q14 from USD420 in 4Q13.

Outlook  The RM5b 10-year refurbishment program will be a structural change to its home turf operation and act as an earnings catalyst from 2016 onwards. 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 No Changes to FY14-FY15 estimates

Rating Maintain MARKET PERFORM

Valuation  We are rolling over our valuation base to CY15 from CY14 to derive our new target price of RM4.57/SoP share from RM4.39/SoP share previously.

 Key assumptions are: pegged 8.2x EV/EBITDA, from 8.4x, to the local casino operation which is based on

10-year average while maintained 20% discount to the Malaysian operations for UK and USA casino operations.

Risks to Our Call Unfavourable luck factor.

Source: Kenanga