Period

4Q15/FY15

Actual vs. Expectations

FY15 core net profit of RM1.89b came within our expectation (+5%) but beat market consensus by 13%. The adjustment included RM550m forex gains on foreign currency denominated financial assets at adjusted EBITDA level for investment and other segment.

Dividends

A first and final NDPS of 3.5 sen was recommended in 4Q15 for FY15, which is lower than the 4.0 sen paid in FY14.

Key Results Highlights

Despite 4Q15 core profit contracting 33% QoQ to RM500.1m from RM756.6m in 3Q15, the group overall reported a broad-base EBITDA growth except the oil & gas segment which saw its earnings sliding 12% to RM41.0m. The drop in bottomline was mainly attributable to a loss of RM150.1m for investment and others segment at EBITDA level from a profit of RM604.1m previously. Despite tough operating environment, overall casino operations reported 6% growth at EBITDA level except Genting Singapore plc (GENS; Not Rated). Plantation also contributed positively to the group, thanks to higher FFB growth and the recovery of CPO prices (to be continued overleaf).

Outlook

The group’s earnings are likely to face challenges in the near-term, especially the casino operations at GENS, which witnessed continued decline in VIP business volume. However, we remain positive on RWG due to its stable earnings while the development under the Genting Integrated Tourism Plan should likely turn the hilltop resort into a main holiday attraction in the region. Meanwhile, the North America operations should improve further as new Resort World Bimini has shown improvement in the recent quarters while the UK operations could continue to see tougher times due to its VIP-centric nature while the Resort World Birmingham may need some time before showing meaningful results. We also expect Genting Plantation Bhd (GENP; UP; TP: RM11.30) to have a better year in FY16 with the expectation of higher CPO prices this year.

Change to Forecasts

No changes in FY16-FY17E

Rating

Maintain OUTPERFORM

Valuation

Given improving sentiment, we decided to lower the holding company discount from 10-year average of 30% to 20% to its unchanged SoP valuation of RM12.18/share. Our new price target is now raised to RM9.74/share from RM8.52/share previously.

Risks to Our Call

Poorer luck factor.

Sustained decline in CPO prices.

Source: Kenanga Research - 24 Feb 2016