Genting Berhad

Genting has released their quarterly result in this week and below is the comment from HDBS. HDBS is upgrading their call from HOLD to BUY with a target price of RM8.60.


Results
Genting’s 2Q07 NI included EI amounting to RM298.1m. Stripping this out, pretax profit from continuing operations came in at RM618.3m (+13% y-o-y; -2% q-o-q). Revenue surged 42% y-o-y given the inclusion of Stanley Leisure effective Oct
2006.
Nevertheless, operating profit was crimped by losses from Genting International (GIL SP) arising from fair valuation losses and impairment losses on intangible assets
totaling S$43.3m. This saw a 10ppt contraction in gaming EBIT margin to 28% (2Q06: 43%). Also, finance cost rose 2x to RM100.5m. 1H07 NI included EI amounting to RM872m. Stripping this out, pretax profit from continuing operations came in at RM1.2b (+20% y-o-y), in line with house and market expectation.

Outlook
We maintain our core pretax profit for continuing operations of RM2.5b for FY07
and RM3.0b for FY08. Core net profit is projected to come in at RM1.4b for FY07 and RM1.5b (+12% y-o-y), driven by higher gaming contribution from Resorts World and Stanley Leisure. Also, non-core earnings from plantation, oil and gas is expected to rise on the back of higher selling prices for the plantation sector and higher production output for the oil and gas division. The power division will also continue to provide firm operating
cashflow.