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Genting Bhd
(Nov 12, RM9.20)
Maintain “outperform” with a target price (TP) of RM11.84:
Despite reporting the weakest quarterly results since the first quarter of financial year 2011 (1QFY11), Genting Singapore plc’s 3QFY14 results came in within expectations with the nine months of financial year 2014 (9MFY14) net profit of S$516.3 million (RM1.7 billion) making up 74% of consensus FY14 full-year estimates.

At the adjusted earnings before interest, taxes, depreciation and amortisation (ebitda) level, the 9MFY14 earnings of S$948.7 million accounted for 67% or 70% of house or street’s FY14 full-year estimates.

No dividend was declared as expected.

The 3QFY14 profit after tax (PAT) dipped 3% quarter-on-quarter (q-o-q) to S$127.1 million after a 14% decline in revenue, no thanks to a decline in gaming business volume and poorer luck factor.

The 3QFY14 rolling chip volume slid 9% q-o-q to S$14.3 billion from S$15.7 billion in 2QFY14 while the rolling chip win percentage dipped to 2% from 3%.

On the other hand, non-gaming revenue rose 9% due to better hotel occupancy and room rates.

Year-on-year, 3QFY14 PAT plunged 43% from S$222.7 million while revenue declined 17% due to weaker results from the gaming business.

The 3QFY14 rolling chip volume fell 11% from S$16.2 billion while the luck factor dropped from 2.5%.

Non-gaming also posted a weaker top line by 2%.

Resorts World Sentosa continued to outpace Marina Bay Sands for the fifth consecutive quarter as the market share for rolling chip volume inched up to 61% in 3QFY14 from 60% in 2QFY14.

This was also higher than the 54% market share recorded in 3QFY13.

The total daily average visitor to Universal Studios Singapore and Marine Life Park improved by another 10% to 18,700 in 3Q14 from 17,000 in 2Q14.

Genting_theedgemarkets

 

The average revenue per unit for Univeral Studios was maintained at S$80 but Marine Life’s Arpu dropped slightly to S$30 from S$32 previously.

On the other hand, the hotel occupancy rate improved to 95% in 3Q14 from 94% both in 2Q14 and 3Q13 while average room rate rebounded to S$408 from S$390 in 2Q14 and S$405 in 3Q13.

Despite a slowdown in visitor arrivals, the management is optimistic of maintaining its business volume in the coming the 4QFY14. With the uncertainty of Chinese arrivals, the business volume is likely to be Asean-centric in the coming months.

For its Jeju Island venture in South Korea, it is still working to secure the necessary approval. In Japan, despite concerns of delay in legalising the casino industry, the management is optimistic that the first bill will be passed in April or May next year.

There is no change to our Genting’s FY14 and FY15 ebitda estimates.

We are keeping our TP for Genting unchanged at RM11.84 per share, based on a 20% holding company discount to its sum-of-parts, pending the release of its 3QFY14 results this month-end.

The risks to Genting Singapore include a weaker-than-expected business volume and poorer luck factor. — Kenanga Research, Nov 12

 

This article first appeared in The Edge Financial Daily, on November 13, 2014.

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