GENM (4715) - Gaming - Backing the right horse
Recommendation: Neutral
For the NFO operators, the industry has gone ex-growth and 2015 will see the triple whammy impact of GST, slower NFO sales and continued strength in the illegal market. We prefer the casino space for its clear re-rating catalyst from the Genting Integrated Tourism Plan rollout. We are Neutral on the sector, with GENM as our top pick. In the NFO space, we cut our TPs for Magnum and BST for lower long-term growth assumptions given that the industry appears to have reached a steady state. For NFOs, we prefer Magnum (which has better dividend visibility) to BST.
We are Neutral on the sector, with GENM as our top pick. In the NFO space, we cut our TPs for Magnum and BST for lower long-term growth assumptions given that the industry appears to have reached a steady state. For NFOs, we prefer Magnum (which has better dividend visibility) to BST.
2014 a poor year
In 2014, the NFO sector underperformed the KLCI by 7%, falling 13% vs. the KLCI’s 6%. The casino space did not fare much better, underperforming the KLCI by 5% (-10% vs. -6%). GENM’s poor operating results were a result of poor VIP win rates while GENT’s underperformance was largely due to its exposure to GENS, which suffered from the negative spillover from the anti-corruption drive in China.
Challenging 2015 for NFOs
The operating environment for the NFO operators remains challenging. We forecast 3% contraction in NFO sales per draw over the next two years. The only bright spot is that pump prices have fallen sharply and this could stem the downtide in NFO sales. Dividends, however, are not at risk as the balance sheets of both NFOs remain very healthy. Even the loss of the Philippines gaming concession by BST should not affect its payout ability as it is Sports Toto Malaysia (STM) that has been paying dividends for the group.
Bet on GENM in 2015
GENM’s re-rating into a top-class international IR should start this year. By mid-2015, we believe that investors will look forward to a jump in FY16 GGR with the introduction of long-overdue additional gaming capacity in late-15. The opening of Sky Avenue/Plaza, Genting Premium Outlet and the new theme park in 2016 should drive visitation strongly. Having underperformed the KLCI in 2014, there is little downside for GENM. At the current price, investors are getting Genting UK, Genting US and its net cash holdings for free.
Source: CIMB Daybreak - 23 January 2015
Recommendation: Neutral
For the NFO operators, the industry has gone ex-growth and 2015 will see the triple whammy impact of GST, slower NFO sales and continued strength in the illegal market. We prefer the casino space for its clear re-rating catalyst from the Genting Integrated Tourism Plan rollout. We are Neutral on the sector, with GENM as our top pick. In the NFO space, we cut our TPs for Magnum and BST for lower long-term growth assumptions given that the industry appears to have reached a steady state. For NFOs, we prefer Magnum (which has better dividend visibility) to BST.
We are Neutral on the sector, with GENM as our top pick. In the NFO space, we cut our TPs for Magnum and BST for lower long-term growth assumptions given that the industry appears to have reached a steady state. For NFOs, we prefer Magnum (which has better dividend visibility) to BST.
2014 a poor year
In 2014, the NFO sector underperformed the KLCI by 7%, falling 13% vs. the KLCI’s 6%. The casino space did not fare much better, underperforming the KLCI by 5% (-10% vs. -6%). GENM’s poor operating results were a result of poor VIP win rates while GENT’s underperformance was largely due to its exposure to GENS, which suffered from the negative spillover from the anti-corruption drive in China.
Challenging 2015 for NFOs
The operating environment for the NFO operators remains challenging. We forecast 3% contraction in NFO sales per draw over the next two years. The only bright spot is that pump prices have fallen sharply and this could stem the downtide in NFO sales. Dividends, however, are not at risk as the balance sheets of both NFOs remain very healthy. Even the loss of the Philippines gaming concession by BST should not affect its payout ability as it is Sports Toto Malaysia (STM) that has been paying dividends for the group.
Bet on GENM in 2015
GENM’s re-rating into a top-class international IR should start this year. By mid-2015, we believe that investors will look forward to a jump in FY16 GGR with the introduction of long-overdue additional gaming capacity in late-15. The opening of Sky Avenue/Plaza, Genting Premium Outlet and the new theme park in 2016 should drive visitation strongly. Having underperformed the KLCI in 2014, there is little downside for GENM. At the current price, investors are getting Genting UK, Genting US and its net cash holdings for free.
Source: CIMB Daybreak - 23 January 2015
