Written by Max Koh
Friday, 27 August 2010 13:59
KUALA LUMPUR: Lady Luck is smiling on Genting Bhd.
The group posted its highest quarterly pre-tax profit ever of RM1.59 billion for the second quarter ended June 30, 2010 (2QFY10), up 179% from RM570.45 million a year earlier, boosted by the newly opened Singapore operations.
Its net profit jumped 244.6% to RM739.17 million for the quarter, from RM214.49 million a year earlier. Revenue doubled to RM4.09 billion from RM2.1 billion, while earnings per share improved to 20 sen from 5.8 sen. It also declared a dividend of 3.3 sen per share for 1H10.
Genting said the increase in revenue and profitability came mainly from its leisure and hospitality division with the commencement of the Resorts World Sentosa operations in Singapore.
Within the leisure and hospitality division, its Singapore operations contributed RM2.03 billion in revenue, compared with RM1.2 billion from Malaysia, and RM250 million from UK and others. Another RM607.6 million in revenue came from its power, plantation, property and investment divisions.
The Singapore operations contributed a pre-tax profit of RM1.19 billion for the quarter, compared with RM592.3 million from Malaysia. This gave the Singapore operations a higher pre-tax profit margin of 58.6% versus 49.3% for Malaysia.
“The improved revenue from Resorts World Genting is mainly due to better luck factor in the premium players business. The UK casino business in 2QFY10 also benefited from an increase in business volume. However, the weaker pound translated to lower casino revenue in ringgit terms,” it said in a filing with Bursa Malaysia.
The group’s plantation arm, Genting Plantations Bhd, also saw higher revenue and profit due to higher palm products prices and increased fresh fruit bunch (FFB) production.
However, the group’s power division, Genting Energy Ltd, recorded lower revenue due to lower generation of electricity by the Meizhou Wan power plant in China.
“The oil & gas division also posted lower revenue and profit, as a result of lower share of entitlement in China despite higher average oil prices achieved, as well as higher expenses incurred. The share of results in jointly controlled entities and associates increased in 2Q10, as the results in 2Q09 was impacted by the share of loss in a jointly controlled entity in Genting Singapore Plc arising from lower property valuation of a property in London,” Genting said.
For the first half ended June 30, 2010, the group posted RM971.6 million in net profit on the back of RM7.2 billion in revenue, due to higher contribution from the leisure and hospitality, plantation and property divisions.
The period also saw a net impairment loss of RM1.3 billion and net dilution gain of RM436.3 million, which arose from the company’s shareholding in Genting Singapore, when the remaining S$450 million convertible bonds were fully converted into new ordinary shares of Genting Singapore in 1H10.
“The net fair value gain on derivative financial instruments of RM67.9 million was mainly in respect of Genting Singapore’s fair value gain on derivative financial instruments from the valuation of the conversion option embedded in the convertible bonds,” it said.
For the rest of the year, the group said it was cautiously optimistic as regional competition continued to impact its performance, with better contribution from its Singapore operations.
“With the opening of Marina Bay Sands, Resorts World Sentosa’s business showed resilience and its business model displayed impressive strength.
“It would continue to make improvements to its attractions, facilities and infrastructure to meet the expectations of its valued guests,” Genting said, adding that construction of its West Zone had started and was expected to commence operations next year.
On Wednesday, CIMB Research maintained its outperform call on Genting with the target price raised to RM10.90 from RM9.40. It also raised its FY10-12 earnings per share (EPS) for Genting by 27%-32%.
“The past two months have seen a slew of activities within the Genting group. While the UK asset transfer is largely neutral for the parent Genting Bhd, Genting Malaysia’s winning bid for the Aqueduct racino and our significant earnings upgrade for Genting Singapore following a stellar 2Q10 for Resorts World Sentosa are positive,” it said.
While remaining neutral on Genting Malaysia, CIMB said it was bullish on Genting Singapore due to its strong results.
“The key winner to emerge from these developments is Genting Singapore. The sale of its UK asset will allow management to concentrate on its flagship property, Resorts World Sentosa. More importantly, its strong 2QFY10 results thumped all expectations and stamped Genting Singapore’s mark as Singapore’s gaming market leader in 2Q,” it added.
Genting gained one sen to close at RM9 yesterday with 6.2 million shares traded.
This article appeared in The Edge Financial Daily, August 27 2010.
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