Genting Bhd
(Nov 29, RM5.83)
Maintain buy with a higher target price of RM8.70: Genting Bhd’s nine months of financial year 2019 (9MFY19) core profit of RM1.8 billion was above our and the street’s estimates at 78% and 80% respectively. The deviation is due to stronger-than-expected earnings contributions from Genting Malaysia and Genting Singapore. Overall, Genting’s 9MFY19 earnings before interest, taxes, depreciation, and amortisation (Ebitda) were flattish or -1.3% year-on-year (y-o-y) but its core profit was down 6.4% y-o-y due to higher depreciation (24.4%) and finance costs (+8.8%) and a lower interest income (15.6%).

For 9MFY19, Genting Singapore operations recorded a lower Ebitda 1.4% y-o-y, mainly due to a decline in mass gaming volume resulting from an increased casino levy. Genting Malaysia’s Ebitda fell 4.1% due to a higher casino duty, cushioned by a higher win rate in the VIP (very important person) segment and an increased non-gaming revenue.

However, the UK and Egypt segment’s Ebitda grew 42.9% on adopting the Malaysian Financial Reporting Standard 16 and a lower provisioning of bad debts. The US and Bahamas’ Ebitda gained 4.8%, driven by a higher business volume from Resorts World New York City and a stronger US dollar.

The 9MFY19 plantation revenue increased 15.8% y-o-y due to a higher sales volume from its downstream manufacturing. However, the increase in business volume was not enough to offset a decline in selling prices, leading to a 16.9% decline in Ebitda. In the power segment, the Banten power plant’s Ebitda was 2% lower y-o-y despite a higher generation. This was due to an impairment loss on receivables in India. The oil and gas segment’s Ebitda also declined 6.7% due to lower average oil prices.

The construction of Resorts World Las Vegas (RWLV) is progressing as planned with a targeted opening in the summer or in the third quarter of 2021. A capital expenditure of US$1.7 billion had been spent as at Sept 30, of a total development cost of US$4.3 billion. RWLV had reportedly unveiled updated plans for the casino. Interesting features and new amenities include a 5,000 capacity theatre, a 75,000 sq ft nightlife and daytime concept, more luxury suites and a sky casino. The management has guided the new amenities’ cost is unsubstantial and existing funds are sufficient. — RHB Research Institute, Nov 29