GENTING (3182) - Genting Bhd - Non-gaming divisions shine
Target RM9.50 (Stock Rating: HOLD)
GENT’s FY14 core net profit of Rm2.0bn was 30% above our forecast and 10% above consensus mainly due to gains by its non-gaming divisions – property, O&G and investment income- that we believe are unsustainable. Full-year dividend of 4 sen (3 sen final) was declared, below our estimate of 6.5 sen. We tweak FY15-16 EPS by -2.0% to 0.1%. We lower our target price to RM9.50, still based on a 20% holding company discount to our RNAV of RM11.86, after updating our target prices for GENM and GENS. Maintain Hold. We advise investors to switch to GENM for exposure to the gaming sector.
GENM rising in importance
In FY14, 45% of Genting Berhad’s (GENT) EBITDA came from Genting Singapore (GENS), 40% from Genting Malaysia (GENM) and 7% from Genting Plantations (GENP). GENT realised a hefty gain of RM224m in investment income/others due to forex translation gains for its overseas assets/funds. Property EBITDA was boosted by the sale of industrial land in Johor by GENP. Its oil and gas (O&G) bonanza (RM100m EBITDA vs. RM58m loss in FY13) is not expected to recur, following the sharp drop in oil prices. In terms of gaming contribution, we estimate that by 2018, GENM will be an equal contributor to GENT’s EBITDA (41%, based on our estimates) with the new Genting Integrated Tourism Plan (GITP) expansion in Genting Highlands,.
Las Vegas- back to the drawing board
During the conference call, Mr Chong Kin Leong, GENT’s Executive Director of Finance, revealed that the original plan for Las Vegas requires reassessment, given the negative anti-gambling developments in China. GENT will review the product positioning for Las Vegas. The capex commitment for this project is not included in its budgeted capex for now. We have not imputed any profit or RNAV contribution from Las Vegas in our estimates.
Switch to GENM
While the operational headwinds faced by GENS are likely to have been factored into GENT’s share price, there are no catalysts in the near term. Concerns about execution risk for the Las Vegas project, given the intense competitive landscape, are mitigated by its cheap entry cost. Hence, we believe that the holding company discount to the SOP valuation of its operating businesses is unlikely to narrow. We advise investors to switch to GENM for gaming exposure.
Source: CIMB Daybreak - 27 February 2015
Target RM9.50 (Stock Rating: HOLD)
GENT’s FY14 core net profit of Rm2.0bn was 30% above our forecast and 10% above consensus mainly due to gains by its non-gaming divisions – property, O&G and investment income- that we believe are unsustainable. Full-year dividend of 4 sen (3 sen final) was declared, below our estimate of 6.5 sen. We tweak FY15-16 EPS by -2.0% to 0.1%. We lower our target price to RM9.50, still based on a 20% holding company discount to our RNAV of RM11.86, after updating our target prices for GENM and GENS. Maintain Hold. We advise investors to switch to GENM for exposure to the gaming sector.
GENM rising in importance
In FY14, 45% of Genting Berhad’s (GENT) EBITDA came from Genting Singapore (GENS), 40% from Genting Malaysia (GENM) and 7% from Genting Plantations (GENP). GENT realised a hefty gain of RM224m in investment income/others due to forex translation gains for its overseas assets/funds. Property EBITDA was boosted by the sale of industrial land in Johor by GENP. Its oil and gas (O&G) bonanza (RM100m EBITDA vs. RM58m loss in FY13) is not expected to recur, following the sharp drop in oil prices. In terms of gaming contribution, we estimate that by 2018, GENM will be an equal contributor to GENT’s EBITDA (41%, based on our estimates) with the new Genting Integrated Tourism Plan (GITP) expansion in Genting Highlands,.
Las Vegas- back to the drawing board
During the conference call, Mr Chong Kin Leong, GENT’s Executive Director of Finance, revealed that the original plan for Las Vegas requires reassessment, given the negative anti-gambling developments in China. GENT will review the product positioning for Las Vegas. The capex commitment for this project is not included in its budgeted capex for now. We have not imputed any profit or RNAV contribution from Las Vegas in our estimates.
Switch to GENM
While the operational headwinds faced by GENS are likely to have been factored into GENT’s share price, there are no catalysts in the near term. Concerns about execution risk for the Las Vegas project, given the intense competitive landscape, are mitigated by its cheap entry cost. Hence, we believe that the holding company discount to the SOP valuation of its operating businesses is unlikely to narrow. We advise investors to switch to GENM for gaming exposure.
Source: CIMB Daybreak - 27 February 2015
