The group reported earnings which were marginally below our estimates, dragged down by poor performance from Genting Singapore and Genting Plantation. We are toning down our earnings forecast, factoring in lower plantation contributions. We are also revising our SOP FV for Genting from RM10.08 to RM10.02 after lowering our FV for Genting Plantation. Maintain BUY, with a revised FV of RM10.02. The stock is currently trading at an undemanding 12.7x FY13 PER.
Marginally below. Genting Bhd’s annualized 9MFY12 core earnings was marginally below our expectations with a –4% deviation from our full-year earnings forecast but a hefty 17.6% below consensus, representing only 61.8% of consensus full-year forecast. The marginal underperformance in earnings vs our full-year forecast was largely attributed to lower CPO prices of its plantation division. 9MFY12 core EBITDA and earnings declined 12% and 24% y-o-y respectively, which was largely expected given a set of relatively poor performance from Genting Singapore. Given Genting Singapore’s substantial 40% earnings contribution to group earnings, its underperformance (earnings contracting 27% y-o-y) was the key drag on Genting group earnings. Following our earnings revision in Genting Plantation, we have tweaked downwards our FY12 and FY13 earnings forecast for Genting Bhd by 1.1% and 0.6% respectively.
Genting Singapore and Plantation the main drags. The weak core earnings delivery essentially reflect: i) Genting Singapore’s 27% decline in 9MFY12 core earnings as a result of a 14% drop in VIP volume and a lower VIP hold percentage, and ii) a 29% slide in plantation earnings via Genting Plantation, which was impacted by weaker CPO prices.
Genting Malaysia sequential 3Q12 numbers impacted by UK ops. Given, Genting Malaysia’s high base effect of its preceding 2Q12 period earnings, 3Q12 earnings declined by 25.4% q-o-q. The decline was largely attributed to a decline in business volumes, lower luck factor and some bad debt write-offs from its UK operations. This was largely expected as its UK casino operations benefitted from exceptionally strong win rates in 2Q12, which resulted in its UK casino operations registering EBITDA growth of 278% q-o-q and 141% y-o-y. The group’s domestic gaming profit declined by a marginal 2% as a result of higher marketing costs. Revenue was up 2% despite lower win rates as relatively healthy domestic gaming volume growth was sufficient to offset the poorer win rates.
FYE Dec (RMm)
|
FY09
|
FY10
|
FY11
|
FY12f
|
FY13f
|
Revenue
|
8,893.6
|
15,194.7
|
19,559.0
|
17,962,3
|
19,613.7
|
Net Profit
|
1,044.4
|
2,202.9
|
2,867.5
|
2,206.2
|
2,553.1
|
% chg y-o-y
|
-18.6
|
77.1
|
30.2
|
-23.1
|
15.7
|
Consensus
|
-
|
-
|
-
|
2,611.0
|
2,899.0
|
EPS (sen)
|
28.2
|
59.6
|
73.3
|
59.3
|
68.7
|
DPS (sen)
|
7.2
|
7.8
|
8.0
|
8.0
|
8.0
|
Dividend yield (%)
|
1.1
|
0.7
|
0.8
|
0.8
|
0.8
|
ROE (%)
|
8.4
|
19.3
|
15.2
|
14.7
|
14.9
|
ROA (%)
|
2.7
|
6.1
|
5.3
|
5.2
|
5.4
|
PER (x)
|
26.9
|
15.5
|
13.6
|
14.4
|
13.1
|
BV/share (RM)
|
3.76
|
4.18
|
4.95
|
5.65
|
6.42
|
P/BV (x)
|
2.8
|
2.5
|
2.1
|
1.8
|
1.6
|
EV/ EBITDA (x)
|
10.7
|
7.3
|
6.8
|
7.2
|
7.0
|
Results Table (RMm)
FYE Dec
|
3Q12
|
2Q12
|
Q-o-Q
chg
|
YTDFY12
|
YTDFY11
|
Y-o-Y
chg
|
Comments
|
Revenue
|
4205.6
|
4512.7
|
-6.8%
|
12771.4
|
13761.1
|
-7.2%
|
Impacted by lower gaming hold percentages and volume at Singapore casino operations and weaker CPO prices for Genting Plantation
|
EBITDA
|
1259.2
|
1859.2
|
-36.0%
|
5106.2
|
6099.3
|
-16.3%
| |
Net interest expense
|
-132.7
|
-117.5
|
12.9%
|
-361.6
|
-377.1
|
-4.1%
| |
Associates
|
15.2
|
20.3
|
-25.0%
|
41.4
|
66.0
|
-37.2%
| |
Depreciation
|
-341.4
|
-434.9
|
-21.5%
|
-1183.3
|
-1028.2
|
15.1%
|
Higher on operational ramp up of RWNY
|
PBT
|
803.5
|
1391.2
|
-42.2%
|
3519.8
|
4638.2
|
-24.1%
| |
Exceptional Items
|
-116.4
|
59.9
|
-99.8
|
-38.1
| |||
Tax, MI and Others
|
-244.2
|
-339.4
|
-28.0%
|
-860.5
|
-1082.4
|
-20.5%
| |
MI
|
-342.9
|
-517.2
|
-33.7%
|
-1310.0
|
-1635.6
|
-19.9%
| |
Net Profit
|
279.4
|
534.5
|
-47.7%
|
1507.6
|
2094.6
|
-28.0%
| |
Core Net Profit
|
395.8
|
474.6
|
-16.6%
|
1607.3
|
2132.7
|
-24.6%
|
Marginally Below estimates
|
EPS (sen)
|
6.1
|
14.5
|
-57.7%
|
32.9
|
53.0
|
-37.9%
| |
DPS (sen)
|
-
|
3.5
|
-
|
3.5
|
3.5
|
-
|
Power division earnings down on high base effect. Power earnings declined 2% y-o-y on the back of lower dispatch from the Meizhou Wan power plant but the overall drag in performance from Meizhou Wan was partially lifted by the maiden contribution from its Jangi Wind Farm operations in India.
Figure 1: Genting Bhd’s SOP valuation
Source: OSK, Companies
EARNINGS FORECAST
FYE Dec (RMm)
|
FY09
|
FY10
|
FY11
|
FY12f
|
FY13f
|
Turnover
|
8,893.6
|
15,194.7
|
19,559.0
|
17,962.3
|
19,613.7
|
EBITDA
|
3,468.1
|
6,879.9
|
8,349.5
|
7,305.1
|
8,127.3
|
PBT
|
2,652.3
|
5,180.3
|
6,268.9
|
5,726.9
|
6,356.1
|
Core Net Profit
|
1,168.2
|
2,989.1
|
2,711.9
|
2,206.2
|
2,553.1
|
Net Profit
|
1,044.4
|
2,202.9
|
2,867.5
|
2,206.2
|
2,553.1
|
Core EPS (sen)
|
31.4
|
80.4
|
73.3
|
59.3
|
68.7
|
DPS (sen)
|
7.2
|
7.8
|
8.0
|
8.0
|
8.0
|
Margin
| |||||
EBITDA (%)
|
39.0%
|
45.3%
|
45.0%
|
40.6%
|
41.4%
|
PBT (%)
|
29.8%
|
34.1%
|
35.4%
|
31.7%
|
32.3%
|
Core Net Profit (%)
|
13.1%
|
19.7%
|
15.4%
|
12.3%
|
13.1%
|
ROE (%)
|
8.4
|
19.3
|
15.2
|
14.7
|
14.9
|
ROA (%)
|
2.7
|
6.1
|
5.3
|
5.2
|
5.4
|
Balance Sheet
| |||||
Fixed Assets
|
16,450.0
|
18,684.5
|
21,629.7
|
22,785.5
|
23,627.2
|
Current Assets
|
16,546..5
|
19,266.3
|
18,829.1
|
25,310.2
|
26,473.1
|
Other Assets
|
10,504.5
|
11,063.4
|
13,885.9
|
17,171.1
|
18,624.1
|
Total Assets
|
43,501.0
|
49,014.2
|
54,344.7
|
65,266.8
|
68,724.4
|
Current Liabilities
|
3,436.1
|
5,907.9
|
7,234.7
|
7,466.9
|
8,105.4
|
LT Liabilities
|
14,352.5
|
13,659.8
|
13,934.4
|
15,845.2
|
16,195.1
|
Shareholders' Funds
|
25,712.4
|
29,446.5
|
33,175.6
|
41,954.7
|
44,423.9
|
Net Gearing (%)
|
Net cash
|
Net cash
|
Net Cash
|
10.3%
|
8.1%
|
Source: OSK
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