Review

• Excluding exceptional items totalling RM139.3mn, Genting’s 1H19 core profit of RM1.3bn came in above our expectation at 67.7% our full-year forecast and 56.0% of consensus estimates. The variance was largely due to higher-than-expected contribution from Genting Malaysia.

• 1H19 adjusted EBITDA surged 3.0% YoY to RM4.0bn with increased contributions from all units except plantation, property and oil and gas divisions. Bulk of the earnings came from gaming operations in Malaysia (34%) and Singapore (48.2%).

• For 1H19, GENS’ adjusted EBITDA was little changed from a year ago at S$624.1mn on the back of 3.4% YoY rise in revenue. For 2Q19 YoY comparison, revenue and adjusted EBITDA were lifted by higher win percentage in the VIP segment, which boosted the quarterly earnings up by 10.7% YoY to S$294.4mn. However, on a hold-normalised basis, the EBITDA would have dropped by 20% YoY to S$230mn. For 2Q19, GENS’ rolling chip volume market share stood at 47% (vs 44% in 1Q19 and 50% in 2Q18). Coupled with a higher win percentage of 3.7%, the rolling win market share was 57%. In the mass segment, the mass win market share was soft at 37%. (see GENT report dated 5/8/2019).

• GENM’s 1H19 adjusted EBITDA increased by 6.6% on the back of 10% rise in revenue. The increase in EBITDA came mainly from UK and US operations with respective EBITDA growth of 43.3% and 18.4%, stemming from 1) the adoption of MFRS 16 (for UK operations); 2) lower losses from Bimini operations and strengthening of US$ against RM. Malaysian operations recorded 2% rise in adjusted EBITDA for 1H19 due to exceptionally high hold percentage for 1H19. Based on a normalised hold percentage, 1H19 adjusted EBITDA from Malaysian operations would have declined by 12% (see GENM report).

Impact

• We tweak Genting’s FY19-21 earnings projections by 8.3%/-8.7%/- 6.2% after consolidating GENM’s revised profit forecast for FY19-21.

Outlook

• For Las Vegas project, it has completed concrete works for both the West and East towers, topping off at the 69th level, according to announcement. In terms of percentage of completion, it has reached 36.6% as at June 19 where the company has incurred US$1.5bn out of total project estimated costs of US$4.1bn.

Valuation

• With the change in GENM’s fair value (from RM3.47 to RM3.30), we cut Genting’s SOP-valuation to RM6.87 (from RM6.97 previously). However, since our last downgrade in July-19, value has re-emerged after the share price plummeted by 13.7%. As such, we upgrade our stock call for Genting to Buy (from sell previously).

Source: TA Research - 30 Aug 2019