KUALA LUMPUR (Nov 24): Genting Bhd’s third quarter financial results were within analysts’ expectations, although the conglomerate’s net profit was down 67%, dragged by hefty impairment plus higher expenses and finance cost.  
 
Public Investment Bank has raised its target price to RM11.50. 
 
In a results review note, Public Investment Bank maintained its “Outperform” call on Genting, with a higher target price of RM11.50, from RM10.80 previously, despite sharply lower quarterly earnings.
 
Its analyst Eltricia Foong said in the medium -to long-term, catalysts for Genting include Genting Singapore plc's (GENS) possible venture into the Japanese gaming market, expansion of Resorts World New York and the completion of an integrated resort in Las Vegas.
 
“Meanwhile, the performance of its gaming operations in Singapore should remain positive, underpinned by stronger VIP and premium mass business volume,” she said.
 
The research house noted higher net profit for 9MFY17 was mainly on higher contribution from GENS and the plantation division.
 
“For 9MFY17 (for the nine-month period ended Sept 30, 2017), core net profit of RM1.79 billion came in above our expectation, but within consensus full-year estimates.
 
“The discrepancy in our forecast was largely due to higher contribution from GENS, although Genting Malaysia Bhd’s (GenM) results were below our expectation.
 
“After accounting for lower earnings forecasts for GenM and higher contribution from GENS, we raise our FY17-19F estimates for Genting by 1% to 7%,” Public Investment Bank said.
 
Genting owns 49.32% of GenM, and 52.84% of GES.
 
Yesterday, Genting announced its net profit slipped to RM191.13 million in the third quarter ended Sept 30, 2017 (3QFY17), from RM574 million a year ago, dragged by impairment losses plus a sharp rise on expenses and finance costs, while revenue grew 7.6% to RM5.04 billion in 3QFY17, from RM4.68 billion in 3QFY16.
 
For 9MFY17, the group’s accumulative net profit went up by 25.8% to RM1.25 billion, from RM990 million a year ago. Revenue came in 8% higher to RM14.8 billion, from RM13.61 billion.
 
CIMB Research analyst Kristine Wong has upgraded her recommendation on the stock to “Add”, from “Hold”, with a higher target price of RM10.70.
 
“Our target price is still based on a 30% holding discount to our RNAV estimate of RM15.28. We are upgrading our call to an “Add”, as we think that Genting is a cheaper proxy to ride the positive upside to its listed subsidiaries, GenM and GENS.
 
“Genting’s 9MFY17 core earnings of RM1.3 billion came in line with our expectations but below consensus, representing 64% and 60% of respective full-year estimates,” she said.
 
Wong said GENS is still an important pillar, in which the contributions to Genting’s 9MFY17 earnings before interest, taxes, depreciation and amortization (EBITDA) met expectations, with GENS making up 55% of overall EBITDA, GenM forming 38% and Genting Plantations Bhd at 8%.
 
At 10am, Genting shares fell two sen or 0.22% to RM9.13, with 386,300 shares traded, for a market capitalisation of RM35 billion.