GENTING – Fundamental Analysis (6 Sep 2015)

GENTING Analysis:-

Excel – http://1drv.ms/1FqLyUd

My View:-

  • Valuation:
    • 5Y DCF:
      • Good Scenario (6.0% 8.0%): From 11.07 to 11.48 (Uncertainty Risk: MEDIUM)
      • Base Scenario (3.0% 5.0%): From 10.51 to 10.88 (Uncertainty Risk: MEDIUM)
      • Bad Scenario (0.0% 2.0%): From 9.99 to 10.33 (Uncertainty Risk: MEDIUM)
      • Ugly Scenario (-4.0% -2.0%): From 9.37 to 9.67 (Uncertainty Risk: MEDIUM)
      • At current price (6.91), based on RDCF, assumption of FCFF growth rate in the next 5 years is -29.5%.
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.405) – 9.100 (Uncertainty Risk: MEDIUM)
        • R4Q (EPS: 0.327) – 7.352 (Uncertainty Risk: HIGH)
      • Forward:
        • FY15 (EPS: 0.477 ± 5%) – From 10.178 to 11.249 (Uncertainty Risk: MEDIUM)
        • FY16 (EPS: 0.525 ± 5%) – From 11.211 to 12.391 (Uncertainty Risk: LOW to MEDIUM)
      • EPS applied to reach the current stock price (6.91): 0.307
  • GENT reported 2Q15 net profit of only MYR67.9m (-82% YoY, -89% QoQ) but this was due to SGD179.m of derivative and forex losses at GENS and MYR109.9m of impairment losses. 2Q15 core net profit of MYR282.6m (-36% YoY, -21% QoQ) brought 1H15 core net profit to MYR636.2m (-34% YoY)
  • GENS’ 2H15 VIP win rate and thus, earnings, should normalise at higher levels, boosted by Genting Hotel Jurong accommodating more mass-market gamblers.
  • GENM may benefit from the opening of ~800 rooms at Hotel Tower 2A, possible visa exemption for Mainland Chinese individuals and pivot to the higher margin premium mass segment.
  • 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
  • Valuation wise, GENTING is very attractive, but there are many uncertainties at this moment.
  • I will continue to hold it, and accumulate it when timing is good.

Latest Financial – Q2 2015 Financial Report (26 Aug 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4846989

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

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