GENTING – Fundamental Analysis (2 Jun 2015)

GENTING Analysis:-

Excel – http://1drv.ms/1eNa0Iz

Notes – http://tinyurl.com/kbtptlf

My View:-

  • Valuation:
    • 5Y DCF:
      • Good Scenario: 11.48 (Fair value uncertainty: MEDIUM)
      • Base Scenario: 10.69 (Fair value uncertainty: MEDIUM)
      • Bad Scenario: 9.99 (Fair value uncertainty: MEDIUM)
      • Ugly Scenario: 9.37 (Fair value uncertainty: HIGH)
      • At current price (8.36), based on RDCF, assumption of FCFF growth rate in the next 5 years is -12%.
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.405) – Fair value 8.61 (Fair Value Uncertainty: HIGH)
        • R4Q (EPS: 0.429) – Fair value 9.12 (Fair Value Uncertainty: HIGH)
      • Forward:
        • FY15 (EPS: 0.531) – Fair value 11.29 (Fair Value Uncertainty: MEDIUM)
        • FY16 (EPS: 0.595) – Fair value 12.65 (Fair Value Uncertainty: MEDIUM)
      • EPS applied to reach the current stock price (8.36): 0.393
  • GENTING is still undervalue.
  • 1Q15 net profit of MYR620.1m (+25% YoY, +126% QoQ) was buoyed by forex and disposal gains. However, there are few issues:
    • 53%-owned GENS suffered from:
      1. lower-than-expected VIP volume of SGD12.4b
      2. below theoretical VIP win rate of 2.5%
      3. still-high bad debts of SGD76.3m.
    • 29 May 2015 – In a conference call two weeks ago, the management of GENS guided challenging prospects for its gaming business, especially the highroller segment from China.
    • Genting Plantations Bhd saw its 1Q15 core earnings fell sharply by 56% on weaker FFB production, which dropped 25% to 353k mt on seasonal weakness. This is despite a higher CPO selling price which rose 3% to RM2,246/mt from RM2,176/mt while average palm kernel price gained 27% to RM1,751/mt from RM1,378/mt previously.
  • While Genting continues to be in expansion mode, most of its current investments will only come to fruition in 2H15/2016. There are limited near-term catalysts for the group
  • As of now, I will continue to hold, but won’t accumulate GENTING because there are many uncertainties at this moment.

Latest Financial – Q1 2015 Financial Report (28 May 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4756521

At the time of writing, I owned shares of GENTING.

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