Period

1Q15

Actual vs. Expectations

At 24%/25% of house/street’s FY15 full-year estimates, the 1Q15 core net profit of RM349.9m came within expectations.

Dividends

No dividend was declared as expected.

Key Results Highlights

The 1Q15 core profit fell 14% QoQ to RM349.9m, despite a 2% rise in revenue over the quarter. This was partly due to a higher effective tax rate of 25% vs. 20% in 4Q14 while the turnaround in North American operations was offset by the earnings decline in Malaysia and UK operations.

RWG reported a 3% QoQ drop in adjusted EBITDA to RM484.7m in 1Q15 from RM497.1m in 4Q14 on the back of 3% decline in topline while the UK casino operations posted adjusted EBITDA, which plunged 60% to RM38.3m from RM96.4m, despite revenue rising 4% over the quarter, mainly due to higher amount of bad debts written off.

However, the North American operations reported a turnaround at adjusted EBITDA of RM46.8m from a loss of RM25.2m previously. This was due to: (i) RWB reported lower loss at EBITDA level by RM17.8m on higher visitations and business volume, (ii) lower payroll and higher revenue at RWNYC, and (iii) RM55.5m project cost written off in 4Q14 due to the unsuccessful application of the licenses in the New York State.

Outlook

The RM5b 10-year refurbishment program will be a structural change to its home turf operations 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.

FY16-FY17 estimates being introduced with earnings to grow at 6%-7%.

Rating

Maintain MARKET PERFORM

Valuation

We raise our price target to RM4.52/SoP share from RM4.30/SoP share as we rolled over the valuation base-year to 2016 from 2015.

Risks to Our Call

Poorer luck factor.

Source: Kenanga Research - 29 May 2015