Genting dips 3.48% as GENS posted weaker 1Q result

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KUALA LUMPUR (May 15): Shares of Genting Bhd fell as much as 32 sen or 3.48% in the early trades after its 52%-owned Genting Singapore PLC (GENS) posted disappointing results in the first quarter of financial year 2015 (1QFY15).

At 10.38am, Genting's (fundamental: 2.10; valuation: 0.80) stock was down 30 sen or 3.26% at RM8.90, off a low of RM8.88 it reached earlier, making it the second largest loser across the bourse.

Some 1.1 million shares changed hands between RM8.88 and RM9.18. It has a market capitalisation of RM34.205 billion at the current price.

GENS saw its net profit for the first quarter ended March 31, 2015 (1QFY15) plunge 64% to S$91.73 million or 0.52 cent per share from S$257.55 million or 1.87 cent a year ago, on the back of a weak premium gaming market.

Revenue for 1QFY15 also fell 23% to S$639.24 million from S$828.83 million in 1QFY14.

In a note to clients today, Kenanga Investment Bank Research noted GENS' weaker-than-expected results were mainly driven by the drop in casino business volume, especially the VIP segment.

"While expecting better non-gaming earnings this year, management guided challenging prospects for gaming business, especially the high-roller segment from China," Kenanga said.

"With the uncertainty of Chinese arrivals, the business volume is likely to be ASEAN-centric in the coming months," it added.

Kenanga made no changes to its forecasts on GENS with a not rated rating, while Genting (fundamental: 2.1; valuation: 1.8) is kept at Outperform call with unchanged target price of RM11.53 per share.

Kenanga derived the TP based on a 20% holding company discount to its sum-of-parts (SoP) pending the release of its 1Q15 results later this month-end.

Meanwhile, Affin Hwang Research said in a report today that the short-term outlook for GENS would likely remain weak due to sluggish VIP volumes and high bad debt.

"On a positive note, the US$1.8 billion Resorts World Jeju (RWJ) in Korea is likely to be on track to receive the casino license in 2016 as we gather that the local provincial assembly has passed the casino ordinance.

"Management is hopeful that the Japan casino bill will be
passed in the next few months," the firm added.

This has prompted Affin Hwang to maintain Genting's Hold call with unchanged TP of RM9.25.

"Our earnings forecasts are unchanged pending Genting's 1Q15 results later this month," Affin Hwang added.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)