We are maintaining our BUY call on Genting Berhad (GENT) with a higher TP of RM12.70, as we incorporate the latest forecast for its subsidiaries, and its latest capital structure. 2017 PATAMI of RM1,697m (-28% yoy) was below our and consensus expectations, due to forex losses from its US$ investment, and also multiples writeoff of investment related to the holding co. GENT has also announced a special dividend of 7.0sen (DPS of 21.5sen for 2017) as its subsidiaries have opted for a higher dividend payout for the year.

Funding Vegas Through Dividends From Genting Singapore

Although the overall capex needed for the Resort World Las Vegas has yet to be finalised, GENT plans to finance the project from the recently raised US$1bn debt, and the remainder from on-shore US$ debt facilities. The interest payment for the debt will be finance mainly by the dividend received from Genting Singapore (GENS). Management has indicated that they prefer using GENS dividend (in S$) due to the ease of convertibility into other currencies.

Impairment and Unfavourable Forex Movement

GENT continue to record more impairments and investment losses in 4Q. Apart from the impairment on the UK casino license, Lanco Kondapalli Power in India, which was impaired earlier, GENT also wrote down the value of a life science investment in US and certain of the Group’s available-for-sale financial assets. The lower income from the investment arm, was mainly due to unfavourable forex movement (strengthening of ringgit), similar to what happened in 3Q17, however, the forex losses are merely accounting losses and not yet realised.

Still a BUY With a Slightly Higher TP of RM12.70

We are maintaining our BUY call on GENT with revised higher RNAVbased 12-month TP of RM12.70 (from RM12.23), as we incorporate the latest fair value of its listed subsidiaries – GENS, GENM and GENP (Genting Plantations). GENT remains our top pick in the gaming sector, as we consider it the more attractive alternative to benefit from the upside of its other listed subsidiaries, GENM and GENS, and its holding co discount which is still above the +1 Stdev of its historical average.

Source: Affin Hwang Research - 28 Feb 2018