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Results Note – Genting Malaysia (REDUCE, downgrade) - Higher hilltop casino A&P dampens FY12 profits




Affin Hwang Investment Bank Bhd


28 Feb 2013





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Higher hilltop casino A&P dampens FY12 profits 8% below Affin estimates but inline with consensus Against a backdrop of higher Genting Highlands promotional activities in the quarter, 4QFY12 core net profit rose 7% qoq to RM420.3m (-1.5% yoy). This brings full year FY12 core net profit to RM1,605m – a growth of 3.4% yoy and well within consensus estimates, albeit 8% below Affin’s forecast. Stepping into FY13, we project pedestrian core net profit of RM1,587m (PER 13.4x, ROE 11.2%) given a high base and higher promotional expenses to entice punters to the hilltop casino. We also do not expect a repeat of UK’s 23% yoy surge in FY12 EBITDA – which saw management capitalising on the June 2012 London Olympics. With a mere 8% upside to our unchanged TP of RM4.00 (Malaysia valued at 8.5x EBITDA), we downgrade our rating from BUY to ADD. The stock continues to offer resilient domestic earnings base, strong balance sheet, growth ambition and attractive valuations (cheapest gaming stock in the region). That said, we believe the absence of overseas gaming opportunities may curtail further share price performance for the stock.

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