CIMB - 07 Nov 2007

What’s on the table

Genting (S$0.685) - 3QFY07 results - Impairment hits 3Q, Sentosa cost raised GIL's annualised 9M core net profit was 77% and 62% below ours and consensus full-year estimate. It reported a S$393m net loss in 3Q.

As expected, there were no dividends. Topline from its UK operations was hurt by the the UK gaming duty hike and smoking ban, which hurt 3Q margins. Interest expense was significantly higher, while GIL took a S$455m impairment loss for UK assets.

Its Sentosa IR project budget is now revised up to S$6bn from S$5.2bn as GIL is enhancing the project's value proposition with a higher-end target. As such, the project IRR of 15% is unchanged.

We now expect a large loss for FY07 and revise FY08-09 forecasts 17%-42% lower given to account for higher interest expense and depreciation. Our end-CY08 sum-of-parts RNAV target price is revised to S$0.86 from S$0.89 after taking into account dilution from its 3-for-5 rights issue and factor a 100%-interest in Sentosa.

GIL remains a solid play into Singapore’s tourism and gaming potential with the nearer-term catalyst being the growing optimism of its upgraded Sentosa project. Maintain Outperform.