Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: MAYBANK
Genting Malaysia Bhd
(Feb 24, RM3.22)
Upgrade to buy at RM3.31 with revised target price RM3.67 (from RM2.90): We are impressed by Genting Malaysia's resilient operations despite competition from Singapore. We raise our earnings forecasts by 30% to 37% to account for higher net gaming revenue and maiden Aqueduct contributions. We raise our ex-net cash discounted cash flow-based (DCF) target price to RM3.67 and revise our 'sell' call to 'buy'.
Core net profit in 4Q10 of RM362.9 million (+2% year-on-year, +1% quarter-on-quarter) brought 2010 core net profit to RM1.4 billion (+4% y-o-y) or 124% of our earnings estimate and 110% of consensus estimate. The outperformance was due to q-o-q growth at Resorts World Genting (RWG) despite competition from Singapore, which developed a S$6.7 billion (RM16 billion) industry of its own. The total eight sen less tax (FY09: 7.3 sen less tax) dividend per share (DPS) declared was marginally above expectations.
Core net profit in 4Q10 reflected higher VIP volume and luck factor at RWG y-o-y and q-o-q. Revenue in 2010 would have been 2% lower y-o-y under the normal luck factor, but that is admirable given the new competition. Visitor arrivals at RWG in 2010 rose 2% y-o-y to 19.9 million. Note that 3'' months of Genting UK's operations ' RM18.3 million earnings before interest, tax, depreciation and amortisation (Ebitda) ' were reflected in 2010. The year's Ebitda margin eased 160bps due to higher payroll and promotional expenses.
Our 30% to 37% higher net profit estimates reflect a higher net gaming revenue on RWG's resilient operations and maiden Aqueduct contributions (assumes June opening). We estimate the Aqueduct will contribute some US$50 million or RM150 million to core net profit per year and expect RWG operations to remain resilient.
With our estimates upgrade, we raise our ex-net cash DCF-based target price from RM2.90 to RM3.67. At its last price, the market is discounting not only Genting Malaysia's net cash but the Aqueduct as well. One-year forward PER is undemanding in light of its pipeline of catalysts (introduction of table games at Aqueduct and greenfield casinos in Newham, London and Hoi An, Vietnam). ' Maybank IB, Feb 24
This article appeared in The Edge Financial Daily, February 25, 2011.
Company Name: GENTING MALAYSIA BERHAD
Research House: MAYBANK
Genting Malaysia Bhd
(Feb 24, RM3.22)
Upgrade to buy at RM3.31 with revised target price RM3.67 (from RM2.90): We are impressed by Genting Malaysia's resilient operations despite competition from Singapore. We raise our earnings forecasts by 30% to 37% to account for higher net gaming revenue and maiden Aqueduct contributions. We raise our ex-net cash discounted cash flow-based (DCF) target price to RM3.67 and revise our 'sell' call to 'buy'.
Core net profit in 4Q10 of RM362.9 million (+2% year-on-year, +1% quarter-on-quarter) brought 2010 core net profit to RM1.4 billion (+4% y-o-y) or 124% of our earnings estimate and 110% of consensus estimate. The outperformance was due to q-o-q growth at Resorts World Genting (RWG) despite competition from Singapore, which developed a S$6.7 billion (RM16 billion) industry of its own. The total eight sen less tax (FY09: 7.3 sen less tax) dividend per share (DPS) declared was marginally above expectations.
Core net profit in 4Q10 reflected higher VIP volume and luck factor at RWG y-o-y and q-o-q. Revenue in 2010 would have been 2% lower y-o-y under the normal luck factor, but that is admirable given the new competition. Visitor arrivals at RWG in 2010 rose 2% y-o-y to 19.9 million. Note that 3'' months of Genting UK's operations ' RM18.3 million earnings before interest, tax, depreciation and amortisation (Ebitda) ' were reflected in 2010. The year's Ebitda margin eased 160bps due to higher payroll and promotional expenses.
Our 30% to 37% higher net profit estimates reflect a higher net gaming revenue on RWG's resilient operations and maiden Aqueduct contributions (assumes June opening). We estimate the Aqueduct will contribute some US$50 million or RM150 million to core net profit per year and expect RWG operations to remain resilient.
With our estimates upgrade, we raise our ex-net cash DCF-based target price from RM2.90 to RM3.67. At its last price, the market is discounting not only Genting Malaysia's net cash but the Aqueduct as well. One-year forward PER is undemanding in light of its pipeline of catalysts (introduction of table games at Aqueduct and greenfield casinos in Newham, London and Hoi An, Vietnam). ' Maybank IB, Feb 24
This article appeared in The Edge Financial Daily, February 25, 2011.
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