GENTING (3182) : Genting Bhd - No excitement
Target RM9.90 (Stock Rating: HOLD)
GENT’s 9M14 core net profit of RM1.4bn was below our expectations, at 62% of our previous full-year and consensus forecasts on poor performance across the board at GENM, GENP and GENS. No interim dividend was declared in 3Q, as expected. Upon transfer of coverage, our FY14-16 EPS forecasts are cut following our earnings cuts for GENP, GENM and GENS. We also introduce a new target price of RM9.90, still based on 20% holding company discount to our RNAV of RM12.40 (lowered from RNAV of RM14.34 after GENS’s target price was lowered from S$1.72 to S$1.22). With total return of only 6.2%, we downgrade our rating from add to Hold as continued operational headwinds faced by GENS and concerns about the competitive landscape at the Las Vegas strip will continue to weigh on investor sentiment. We advise investors to switch from GENT to GENM for exposure to the gaming sector.
Genting Singapore still the biggest earnings contributor
Contribution to GENT’s 9M14 EBITDA comprised 51% by GENS, 39% by GENM, 7% by GENP and the balance from its energy division. With the change in analyst coverage, resulting in cuts to our GENS forecasts by 34-39% and GENM by 14-34%, and GENP following the drop in our CPO price assumptions, GENT’s earnings forecasts are lowered by 25-33%. Sentiment on GENT will continue to be driven by GENS and developments in Las Vegas.
Little clarity on Las Vegas
At the conference call, Mr. Chong Kin Leong, GENT’s executive director of finance, revealed that GENT is still finalising its development plans and talking to bankers about financing options before finalising the budget and development proposal to submit to the board in early FY15. Capex for the US$4bn Las Vegas project will mostly be incurred in FY16, for a targeted opening in FY17. The casino licence will be awarded about nine months before the casino opening.
Switch to Genting Malaysia
With poorer CPO outlook for GENP and operational headwinds faced by GENS, there are few catalysts, in our view. Notwithstanding the cheap entry cost of its land in Las Vegas, we are concerned about GENT’s ability to cope with the competitive forces in Las Vegas. In the US, we prefer casino exposure in New York and hence, our preference for GENM.
Source: CIMB Daybreak - 24 November 2014
Target RM9.90 (Stock Rating: HOLD)
GENT’s 9M14 core net profit of RM1.4bn was below our expectations, at 62% of our previous full-year and consensus forecasts on poor performance across the board at GENM, GENP and GENS. No interim dividend was declared in 3Q, as expected. Upon transfer of coverage, our FY14-16 EPS forecasts are cut following our earnings cuts for GENP, GENM and GENS. We also introduce a new target price of RM9.90, still based on 20% holding company discount to our RNAV of RM12.40 (lowered from RNAV of RM14.34 after GENS’s target price was lowered from S$1.72 to S$1.22). With total return of only 6.2%, we downgrade our rating from add to Hold as continued operational headwinds faced by GENS and concerns about the competitive landscape at the Las Vegas strip will continue to weigh on investor sentiment. We advise investors to switch from GENT to GENM for exposure to the gaming sector.
Genting Singapore still the biggest earnings contributor
Contribution to GENT’s 9M14 EBITDA comprised 51% by GENS, 39% by GENM, 7% by GENP and the balance from its energy division. With the change in analyst coverage, resulting in cuts to our GENS forecasts by 34-39% and GENM by 14-34%, and GENP following the drop in our CPO price assumptions, GENT’s earnings forecasts are lowered by 25-33%. Sentiment on GENT will continue to be driven by GENS and developments in Las Vegas.
Little clarity on Las Vegas
At the conference call, Mr. Chong Kin Leong, GENT’s executive director of finance, revealed that GENT is still finalising its development plans and talking to bankers about financing options before finalising the budget and development proposal to submit to the board in early FY15. Capex for the US$4bn Las Vegas project will mostly be incurred in FY16, for a targeted opening in FY17. The casino licence will be awarded about nine months before the casino opening.
Switch to Genting Malaysia
With poorer CPO outlook for GENP and operational headwinds faced by GENS, there are few catalysts, in our view. Notwithstanding the cheap entry cost of its land in Las Vegas, we are concerned about GENT’s ability to cope with the competitive forces in Las Vegas. In the US, we prefer casino exposure in New York and hence, our preference for GENM.
Source: CIMB Daybreak - 24 November 2014
