Good gaming quarter for Genting Group
KUCHING: Genting Bhd (Genting) generally saw an all-rounded and good yearly operating numbers in the first quarter of 2017 (1Q17), but fall short of estimates due to minority interests.
Kenanga Investment Bank Bhd (Kenanga Research) said 1Q17 results fell short of expectations with core earnings of RM379.3 million making up only 18 per cent of house and street’s FY17 estimates.
“This was due to higher than expected of minority interest,” it said in a note yesterday.
“Although 1Q17’s core earnings fell 33 per cent quarter on quarter to RM379.3 million with flattish revenue, the decline in earnings was primarily due to forex losses recorded in investment and others segment against forex gains in 4Q16 arising from net forex denominated financial assets.
“In fact, all business segments posted improved results except plantation unit which saw adjusted earnings before interest, tax, depreciation and amortisation ( EBITDA) felling 35 per cent owing to seasonally weaker fresh fruit bunch production by 24 per cent.”
The group’s casino segment registered six per cent earnings growth led by Genting Singapore but Malaysia operations hit by cost incurred for new facilities at the Genting Integrated Tourism Plan (GITP).
On that point, AllianceDBS Research Sdn Bhd (AllianceDBS Research) believed the time was right to buy into Genting Singapore which operates a high cash-generating business in a twoplayer oligopoly.
“Following two tough years, we believe 2017 will mark a recovery in earnings due to an expected recovery in VIP volumes as volumes have bottomed out in 2016, normalising VIP win rate, and lower bad debts given Genting Singapore’s more selective and conservative credit policy over the past year.
AllianceDBS Research also expect contributions from the group’s domestic operations to remain high going forward with the launch of GITP.
The group launched Sky Avenue and Sky Plaza shopping malls, and the new cable car station progressively during 2016.
They are expected to complete Twentieth Century Fox World theme park by the second quarter of 2018.
“We believe that the RM10.4 billion GITP makeover will come with new gaming table capacity of 250 in Sky Plaza, more than 40 per cent increase from 550 gaming tables currently.
“As such, we have assumed GENM’s gaming table capacity to increase progressively from 550 to 800 tables by 2018.”
Another gaming boost could come from its Las Vegas venture. In 2013, Genting directly ventured into the gaming space in the US when it acquired an 87-acre site at the North end of the Las Vegas Strip from Boyd Gaming Corporation.
“The successful execution of this venture could change the group’s earnings profile given that this serves as the group’s first direct involvement in the gaming business,” it added.