Friday, 1 March 2013

Genting Bhd - 4Q12 results within expectations

Period  4Q12/FY12

Actual vs. Expectations  Stripping out the EI, the 4Q12 core net profit of RM650.8m came in within expectations. This brought FY12 core earnings to RM2.63b, which was 4% above our estimates and 5% above that of the market consensus.

Dividends  A 4.5 sen GDPS was declared in 4Q12, bringing the FY12 NDPS to 6.0 sen vs. our forecast of 6.15 sen.

Key highlights  The 4Q12 reported net profit surged 7-fold QoQ to RM2.48b from RM279.4m due mainly to: 1) a RM1.89b gain from the disposal of its Malaysian IPP in 4Q12, 2) a total of RM394.5m in impairment losses in 3Q12, being RM178.7m on its investment in Landmark Bhd (NOT RATED), RM87.5m for Omni Center in Miami and RM102.2m for certain provincial casinos in UK and 3) RM108.0m in assets written off at Genting Singapore’s (“GENS,’ NOT RATED)level. Ex-EI, the core earnings would have risen 7% over the period.

 Strong numbers from both its gaming and nongaming businesses helped to improve GENS’ earnings where its 4Q12 adjusted EBITDA rose 16% QoQ to RM887.8m while the revenue grew 18% to RM1.98b. The luck factor was better in 4Q12 at its VIP segment where its rolling chipwin improved to 3.0% from 2.8% in 3Q12 while the non-gaming also reported encouraging numbers with the launch of Marine Life Park in Nov 2012.

 Genting Malaysia Bhd’s (“GENM,” OP, TP: RM4.19) reported weaker earnings QoQ in 4Q12 but matched our estimates as well as that of the market consensus. The adjusted EBITDA for the Malaysia casino was down 3% QoQ on higher promotional expenses. The UK operations turned profitable due to a higher hold percentage at its London casinos while the Super Storm Sandy hit the USA operations as the average daily win per machine there for the racino dropped to USD365 in 4Q12 from USD387.

 The continued weak CPO prices which fell 22% QoQ, pulled down Genting Plantations Bhd’s (“GENP”, UP; TP: RM7.60) 4Q12 earnings although its FFB volume jumped 21%. The 4Q12 adjusted EBITDA for the plantation segment declined 25% as its revenue dropped 14% over the quarter. The average CPO selling price fell 22% to RM2,219/mt vs. RM2,858/mt in 3Q12 while the palm kernel average price contracted 28% to RM1,097/mt from RM1,890/mt previously.

 Meanwhile, despite its revenue declining 3% QoQ to RM252.9m, the Power segment’s 4Q12 adjusted EBITDA (excluding the Malaysian IPP) rose 25% to RM92.0m due to a higher generation by the key Chinese plant, the Meizhou Wan power plant. The discontinued operation – the Malaysia IPP of which the disposal was completed on 22 Oct 2012 – reported a profit of RM1.91b, of which RM1.89b was the disposal gain.

Outlook  1Q is traditionally a strong quarter due to the CNY effect, which should help GENT’s earnings. GENS guided for a bullish prospect as compared to a cautious outlook three months ago. GENM should enjoy higher earnings on resilient RWG earnings and a better 1Q from RWNYC after the impact of Super Storm Sandy previously, which hit the New York City in Nov 2012.

 Nonetheless, the earnings from Genting UK could be volatile while the sluggish CPO prices do not augur well for GENP.

Change to Forecasts  We are keeping our FY13-FY14 estimates for now.


Valuation  Our new price target is now at RM10.22/share (up from RM9.59/share previously) based on an unchanged 20% holding company discount to its SOP valuation. The adjustment is mainly due to the change in the price target for GENP and the market share prices of GENS and Landmarks.

Risks  Poor luck factor.
 A sustained decline in CPO prices.

Source: Kenanga

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