Genting group set to deliver better results


BY KATHY FONG

Genting Bhd and its subsidiary Resorts World are expected to deliver stellar results for the financial year ended Dec 31 last year as the group’s expansion effort in the hilltop casino resort is reaping fruits. 

Besides there is also steady increase in contribution from its associated company Star Cruises Ltd whose earnings are on the recovery path now. 

The strong crude palm oil prices also enhanced Genting’s income for the recently concluded financial year. 

“The group should release a good set of results with expectation that there isn’t any exceptional items that drag down earnings,'' said a research manager. 

According to Multex Global Estimates, market consensus forecasts Genting’s net profit to be RM773mil for the financial year ended Dec 31 last year, on a turnover of RM3.6bil and earnings per share of RM1.10.  

The group’s profit will have surged 70% if it matches the forecast figures. Genting posted a net profit of RM453.64mil for the financial year 2001. 

Some optimistic analysts have even expected the net profit to exceed RM800mil. 

Genting’s net profit ballooned to RM588.7mil for the nine months to Sept 30, up 90% from RM309.9mil in the previous corresponding period, and earnings per share surging to 83.6 sen from 44 sen. 

The group also reported a 64% jump in pre-tax profit to RM1.19bil for the nine-month period, from RM731.2mil a year ago, on a higher turnover of RM2.61bil against RM2.29bil previously. 

As for Resorts World Bhd, the market expects a net profit of RM710mil on sales revenue of RM2.8bil, and earnings per share of 65.05 sen. 

The forecast net profit is double the RM351.9mil achieved in the financial year 2001.  

For the nine months ended Sept 30 last year, the casino operator’s net profit had already doubled to RM547.6mil from RM271.3mil previously. Earnings per share came in at 50.1 sen compared with 24.8 sen previously. 

Last year was quite an eventful year for the group. Share prices of Genting and Resorts World rose sharply on speculation that the group would be able to win a bid for a casino licence in Macau. The stocks headed down when the group failed in the attempt.  

As for the domestic casino and resorts operation, the group opened the First World Hotel in March. The 3,300 new hotel rooms were offered at as low as RM1 per room.  

The bomb blast in Bali in October last year prompted selling of Genting and Resorts World shares amid worries that this would stop people from visiting the highland resorts.  

The selling was also compounded by the cash call made by Star Cruises in the same month. Investors were concerned that the cash to be pumped into the cruise liner might not be well rewarded. 

A month later, Genting group founder Tan Sri Lim Goh Tong stepped down from his chief executive officer positions in Genting and Resorts World. His 51-year-old son Tan Sri Lim Kok Thay took over both positions. 

When Genting group decided to build the world’s largest hotel – First World Hotel that will have 6,300 rooms – members of the public, including analysts, might have pondered how the management were thinking to occupy the hotel rooms? 

Like it or not, the rising concern on travelling abroad that was triggered by the terrorist attack in the US followed by the bomb blast in Bali, has somewhat benefited the Genting group in terms of increase in tourist arrivals at the highland casino resort. 

Furthermore, given the moderate economic conditions, which are clouded by external uncertainties, Genting Highland Resorts turns out to be an affordable holiday destination for many who intend to be more disciplined in spending. 

The strong growth in tourist arrivals at Genting Highland Resorts helped boost the occupancy rate of the hotel rooms, believed to have reached 80%.  

TA Securities analyst Dennis Lee said the additional 3,300 hotel rooms and new entertainment facilities had not only enabled the group to draw more “traditional” visitors i.e locals and Singaporeans, but also serving tourists from China, India and the Middle-East. 

Malaysia and Singapore visitors account for about 75% of the tourist arrivals at the resort.  

Visitors lately noticed an additional floor space and gaming facilities such as slot machines and gambling tables in the highland casino. 

This has apparently reflected the group’s confidence in its business growth.  

Meanwhile, it is also noted that the construction work for the second phase of First World Hotel with 3,000 more new rooms has already started. This will cost about RM300mil. 

The share prices of Genting and Resorts World are holding rather well despite the soft sentiment on the KLSE. Genting has gained 32% and Resorts World 60% since the beginning of last year. 

However, both counters remain on analysts’ recommendation lists as many said that the current share prices had yet to be factored in the strong earnings growth for the current financial year. 

“Genting group has a nice growth story to tell,'' said Lee from TA Securities. 

In terms of valuation, Genting is a better choice compared with Resorts World. At the current share price, Genting is traded at about 10 times price/earnings ratio based on the financial year 2002 forecast earnings, while Resorts World is at about 15 times. 

The more diversified earning base also makes Genting more appealing than Resorts World. 

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