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.
Rating MARKET
PERFORM
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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