Period  4Q14/FY14

Actual vs. Expectations  4Q14 results came within expectations as FY14 core earnings of RM1.36b beat house/street estimates by 3%/5%.

Dividends  NDPS of 3.5 sen was declared in 4Q14, bringing FY14 NDPS to 6.5 sen vs. our assumption of 6.75 sen.

Key Results Highlights  The 4Q14 core profit soared 23% QoQ to RM407.6m, despite revenue sliding 8% over the quarter. The better results were attributable to improved RWG earnings while the decline in topline was due to UK casino operations which were hit by lower hold percentage.

 RWG reported higher adjusted EBITDA by 20% QoQ to RM497.1m as revenue rose 9% which was backed by improved business volume and luck factor. However, this was mitigated by higher payroll costs.

 However, the UK unit reported lower adjusted EBITDA by 34% QoQ to RM96.4m as revenue plunged 49% to RM342.1m after posting record highs earnings in 3Q14. This was due to lower business volume and luck factor. However, the UK unit reported better adjusted EBITDA margin of 28% vs. 22% due to higher bad debts recovery in 4Q14.

 Meanwhile, the North America operations reported losses at adjusted EBITDA level of RM25.2m in 4Q14 from a profit of RM6.9m although revenue rose 17% QoQ. This was due to: (i) higher payroll cost at RWNYC, and, (ii) higher losses of RM67m from RM8.8m at RWB. In additional, there was a RM55.5m project cost written off on the unsuccessful application for licenses in New York State.

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. The theme park is on track to be ready by end-2016/early- 2017 with no cost overrun at this juncture.

 On the other hand, the yield management initiative should help to improve earnings while the RWNYC numbers should be sustainable. RWB’s new 300- room luxury hotel is expected to reduce its operating loss and to breakeven in 2H15. However, the UK operations could continue to see tougher times due to its VIP-centric nature.

Change to Forecasts  No changes to our FY15 estimates.

Rating Maintain MARKET PERFORM

Valuation  Our target price is maintained at RM4.30/SoP share.

Risks to Our Call  Poorer luck factor. 

Source: Kenanga