Genting Hong Kong -
Price at 20 Jan 2014 (USD) 0.42
Price target - 12mth (USD) 0.54
Lower earnings and price target; still a value play
Deep value and plenty of cash – what's next?
At a 37% discount to market SOTP, Genting Hong Kong remains a deep value stock with nearly US$1.0bn gross cash after paring down its stake in NCLH. The Lim family raised its stake to 58.1 %, or 75.9% including that held by Genting Malaysia.
We see dividends, M& A and fleet rejuvenation as ways to deploy cash. We trim our TP to US $0.545/sh given our earnings cut but maintain Buy.
Cash up significantly; Lim family raises stake
GENHK raked in close to US$738m in 2013 by paring down its stake in NCLH to 31.4% (from 50%).
Given its projected near US$1.0bn gross cash, GENHK has various options including, but not limited to,(1) a fleet renewal program given the average fleet age of 21 years; (2) M&A; and/or (3) pay a dividend.
It is interesting to note that major shareholder Tan Sri KT Lim & Family has raised its stake to 58.1%, from 55.6% previously (ex GENM’s 17.8% stake).
Asian cruise earnings affected by lower holds; earnings trimmed
We understand from our recent meeting with GENHK that 2013 gaming operations in Asian cruise remained robust but profitability was affected by lower VIP holds and a tough comparison given above-theoretical hold in FY12. Coupled with lower associate contribu tions following the NCLH placements, we have lowered our FY13-15E core NP by 54%, 22% and 18% respectively. Lower gaming accounted for most of the FY13E cut while NCLH made up 40- 50% of the reduction in FY14-15E earnings. RWM, which also suffered low hold in 2013, may see a disappointing FY13 given the typhoon effect in Q4.
Trades at 37% discount to ma rket SOTP of US$0.66/share
Following our cut in Asian cruise earnin gs (c.11% SOTP), we lower our DB SOTP to US$0.64, from US$0.67. Our SOTP values NCLH at DB TP of US$34, Travellers on 11.7x FY14E EV/EBITDA (o r DCF), Asian cruise on 5x EV/EBITDA. We peg our 12-TP at a 15% discount to DB SOTP, which implies a fully diluted PER of 17.2x (vs a historical average of 15.3x).
Risks: economic downturn in Asia or globally; slower-than-projec ted Philippines gaming market growth.
Source/Extract/Excerpts/来源/转贴/摘录: Deutsche Bank
Publish date: 22/01/14