Thursday, March 16, 2017

Genting Bhd : Longer-term story HOLD

Genting Bhd : Longer-term story              HOLD

Maintain HOLD on Genting Bhd with an unchanged RNAV-based fair value of RM9.86/share. We believe that Genting Bhd's current valuations have already reflected the earnings improvements of the subsidiaries in FY17F and FY18F. Genting Bhd is currently trading at FY17F fully diluted PE of 21.7x and FY18F fully diluted PE of 19.9x. In comparison, Genting Malaysia's FY17F and FY18F PEs are 17.2x and 15.5x respectively. The Macau casino companies are presently trading at simple average FY17F PE of 23.7x and FY18F PE of 19.9x. We reckon that Genting Bhd's long-term prospects are more interesting. The first phase of Genting Bhd's Resorts World Las Vegas (RWLV) may open in FY19F. We estimate RWLV's annual EBITDA to be more than US$200mil, which may increase Genting Bhd's earnings by 10%. RWLV could improve Genting Bhd's RNAV by more than RM0.50/share.

We do not think there would be a rights issue or private placement to finance the Us$3bil development of RWLV. We reckon that Genting Bhd would be able to finance RWLV with project financing. The debt portion of the RWLV project is expected to cost US$1.5bil to US$1.6bil (RM6.7bil to RM7.1bil). We estimate Genting Bhd's gross cash at RM3.6bil at the company level as at end-December 2016. In January 2017, Genting Bhd raised guaranteed notes amounting to US$1bil. Closer to home, there is a possibility that Genting Group may be interested in Macau if the government opens up the renewal of the casino licences to open bidding. It is not known if there would be a new casino licence up for tender. MGM China's and SJM Holdings' casino concessions are expected to expire in year 2020 while the balance is anticipated to expire in year 2022. Developing a casino in Macau is expected to be costly. The development of Wynn Palace cost US$4.2bil in total while Parisian Macau cost about US$2.7bil.

Others :
Berjaya Food : From venti to tall                HOLD

Hexza Corporation,Censof Holdings,OCK Group,Careplus Group 

Indonesia : Exports will benefit from firm commodity prices and low base
US : A balanced view from the Fed

Power Sector : Malakoff unit issues RM800mil sukuk wakalah
Technology Sector : MyEG to expand to the Philippines in first overseas venture
Construction Sector : Ekovest set to clinch the Blue River Project

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