- Affirm BUY on Genting Malaysia Bhd (GenM), with an unchanged
RNAV-based fair value of RM4.30/share.
- GenM’s 3QFY12 earnings were hit by impairment charges of
RM178.9mil and a RM13.8mil loss in the UK casino division resulting from a low
win percentage.
- Excluding the impairment charges, GenM’s annualised earnings
would have been within our expectations and consensus estimates. Although
GenM’s UK division recorded a loss in 3QFY12, this was compensated by improved
profits from “Resorts World New York” (RWNY).
- The impairment charges were in respect of properties in Miami,
provincial casinos in the UK and a casino concession agreement in Egypt.
- In Malaysia, revenue of the leisure and hospitality
division inched up 1% YoY in 9MFY12 underpinned by a higher volume of business.
This was partly offset by a low win percentage in 1QFY12.
- If the win percentage were to normalise, then revenue and EBITDA
of the division would have increased 5% YoY each in 9MFY12. High-rollers
accounted for 37% of gaming revenue in 9MFY12 versus 36% in 9MFY11.
- In the UK, attendances at the London casinos rose 6% YoY in
9MFY12. Casino attendances at the provinces climbed 3% YoY.
- We understand that the losses of RM13.8mil at the casinos in
the UK were entirely due to a low win percentage at the casinos in London in
3QFY12. Bad debts or provisions were minimal.
- In New York, the racino’s EBITDA margin remained high at 36%
in 3QFY12. EBITDA margin was 34% in 9MFY12. RWNY recorded a daily win of
US$387/machine in 3QFY12 and US$374/machine in 9MFY12.
- We understand that there have not been any updates on the
casino legislative process in New York and Miami. Lawmakers in New York are
currently busy with rebuilding efforts after Superstorm Sandy.
- In spite of the current lack of progress, legislative
sittings in Miami and New York are still scheduled to take place in early-2013.
Hence, the casino bills would be up for debate and discussion again in
early-2013.
Source: AmeSecurities
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