Genting - BUY - 29 Feb 2008

Genting - In line (Results Note)
Price: RM6.85
Target Price: RM9.90
Recommendation: BUY


· FY07 revenue at RM8.5b was within both our expectation and market's. Core net profit of RM1,597.7m was however 4.2% and 6.6% above our forecast and street's estimates respectively. Better performance was driven by leisure & hospitality, plantation and power divisions which posted strong double-digit topline growth.

· QoQ, revenue rose 1.2% but EBITDA slid 0.9% due to lower EBIT contribution from other minor divisions mitigated by higher contribution from plantation and O&G division. Plantation and O&G division recorded strongest EBIT growth of 17.0% and 22.2% respectively on the back of rising CPO and oil price. EBIT for leisure and hospitality division however contracted marginally by 1%, reflecting the challenging operating environment in UK.

· YoY, FY07 revenue and EBITDA rose 32.2% and 11.6% respectively, underpinned by stronger highlands performance, buoyant CPO price and full year impact from Meizhou Wan power plant which contributed only 7 months in FY06. Profit contribution from O&G was lower due to higher cost incurred. Similiarly, property and other divisions also registered lower profit as activities in these divisions slowed down. Normalised pre-tax profit still grew a remarkable 17.9% underpinned by higher interest income (+30.9) and lower associate losses after disposal of StarCruises.

· Final dividend of 4.3 sen proposed bringing total DPS of 37sen including a special 30 sen in memory of the late Tan Sri Lim Goh Tong. This translates into a yield of 5.5%.

· Maintain FY08 forecast but lower FY09 net profit projection by 7.1% to account for higher interest cost associated with the construction of Sentosa Integrated Resorts in Singapore. BUY recommendation maintain with an unchanged target price of RM9.90. Current weakness presents good buying opportunity as it trades at an undemanding 16.1x FY08 PER versus regional average of 26x, a 38% discount.

KENANGA INVESTMENT BANK BERHAD (15678-H)
Research Department