Genting’s  1HFY14  core  earnings  of  MYR1.09bn  were  within expectations  as  weakness  in  its  Malaysia  and  UK  gaming  operations was  offset  by  improved  showing  from  its  Singapore  casino  andplantation division.  We  maintain  our BUY call,  with our SOP-based FV marginally tweaked to MYR10.96 (from MYR11.00).

Results  review.  Genting’s  1HFY14  revenue  grew  5.9%  y-o-y  to MYR9.10bn,  lifted  by  improvements  in  its  US  (+12.1%  y-o-y)  and Singapore  (+20.2%  y-o-y)  gaming  operations  as  well  as  its  plantation division (+29.1% y-o-y). Core  EBITDA expanded  6.2% y-o-y  with overall margin  at  37.0%  vis-à-vis  36.9%  in  1HFY13.  All  in,  1HFY14  core earnings of MYR1.09bn  came within  both consensus and our estimates, at  50.8% and  49.9% of the  respective  full-year  forecasts.  2QFY14  core earnings  of  MYR482.7m  were  weaker  q-o-q  and  y-o-y,  as  its  Malaysia and  UK  gaming  operations  recorded  below-average  VIP  hold  rates. Management declared an interim DPS of 1.0 sen during the quarter.

Looking ahead. Moving into 2HFY14, we expect better showing from its Malaysia and UK gaming segment on normalised hold rates.  However, we  maintain  our  cautious  stance  on  Resorts  World  Sentosa’s  VIP segment  in  view  of  China’s  ongoing  corruption  crackdown.  This  is evident  in  Macau’s  latest  gaming  revenue,  which  fell  3.6%  in  July following a 3.7% decline in June, as its VIP segment is estimated to have plunged by some 20% during the month due to tighter junket liquidity. 

Forecasts  and  risks.  We lower our FY14-15F EPS by 0.2%-4.0% after trimming  earnings  contribution  from  its  Singapore  gaming  unit  in anticipation of a potential slowdown in the latter’s VIP segment. Key risks include fluctuations in luck factor and potential weakness in CPO prices.  

Maintain  BUY.  All in, we maintain  our BUY call. We note that Genting’s proposed  integrated  resort  in  Las  Vegas  could  mark  its  first  directlyowned  gaming  assets.  We  believe  this  could  help  address  market perception tied to its position as a holding company.  Hence, we foresee a near-term re-rating should management secure the required approvals for its Las Vegas  venture.  Moreover,  we expect earnings from its power division to pick up over the longer term as its proposed 660MW site in Banten, Indonesia and 2,000MW new plant in Meizhou Wan, China will commence  operations  come  FY17F.  Following  a  revision  in  our valuations  for  its  listed  subsidiaries,  our  SOP-based  FV  now  stands  at MYR10.96 (from MYR11.00)

Source: RHB