Actual vs. Expectations The 4Q12 core profit of RM413.0m came in within expectations with the FY12 core earnings of RM1.65b coming in 3% and 5% above our estimate as well as that of the market consensus respectively.
Dividends The company has declared a final GDPS of 5.0 sen in 4Q12, totalling FY12 NDPS to 6.6 sen vs. our assumption of 6.75 sen.
Key Results Highlights The 4Q12 headline net profit surged 134% QoQ to RM445.7m from RM190.3m, due mainly to RM178.9m in impairment losses incurred previously in 3Q12 (RM87.5m for Omni Center in Miami, RM64.5m for certain provincial casinos in UK and RM26.9m for a concession agreement in Egypt) vs. a total of RM32.7m exceptional gains in the current quarter. Ex-EI, the bottom line would have declined slightly by 1% to RM413.0m from RM418.3m.
The Malaysian casino posted a 4Q12 adjusted EBITDA, which slid 6% QoQ to RM494.5m from RM525.3m due to higher promotional expenses. The 4Q12 revenue meanwhile eased off slightly by 2% to RM1.38b from RM1.40b previously due to a lower hold percentage in the VIP segment.
The UK casinos returned to the black with an adjusted EBITDA of RM44.7m in 4Q12 from a loss of RM13.8m in 3Q12, as the top line rose 9% to RM312.4m on the back of a higher hold percentage at its London casinos and the higher sum of bad debts written off in 3Q12.
The USA operations meanwhile reported weaker earnings in 4Q12 with the adjusted EBITDA falling 31% QoQ to RM49.7m from RM61.5m as revenue contracted 5% in the quarter. This was due to the impact of Super Storm Sandy, which hit New York City in Nov 2012. As such, the average daily win per machine for the racino dropped to USD365 in 4Q12 from USD387. Outlook 1Q13 should be a seasonally strong quarter due to the CNY festive. Yield management initiative and the new hotel rooms at Genting Highlands should help to improve earnings while the RWNYC numbers should be sustainable. However, the UK operation could continue to see tough times due to its VIP-centric nature.
Change to Forecasts No changes to our FY13-FY14 estimates.
Rating Maintain OUTPERFORM
Valuation Our price target is maintained at RM4.19/SOP share.
Risks Unfavourable luck factor.