Genting 'hold' Petronas Dagangan 'hold', LBS Bina 'outperform'


Genting Malaysia Bhd

By CGS-CIMB

Hold (maintained)

Target price: RM3.25

CIMB has maintained its recommendation of a “hold” on Genting Malaysia Bhd as it awaits more clarity on the possible opening date of its new outdoor theme park.

The research house retains its earnings per share forecasts and its target price of RM3.25 for Genting Malaysian based on its revised net asset value.

The construction of the outdoor theme park is almost complete at 95% but it would not be opened until its lawsuits against Walt Disney Co and 21st Century Fox Inc are settled.

Genting Malaysia is claiming more than US$1bil (RM4.14bil) in damages.

CIMB hosted Genting Malaysia’s management at its annual Malaysia Corporate Day recently where they met close to 40 fund managers and buy-side analysts.

Most of the questions from the investors focussed on the developments on the new outdoor theme park.

Genting Malaysia could not update investors on the possible opening date, indicating that it is still waiting for a court hearing date for the lawsuits.

The lawsuits were filed last November when 21st Century Fox Inc and Walt Disney Co pulled out of an agreement to allow Genting Malaysia to build a theme park using the design and intellectual property rights owned by Fox Entertainment Group, LLC.

The theme park was supposed to have opened in mid-2019 prior to the lawsuits.

In 2013, Genting Malaysia intended to invest just US$150mil (RM620mil) and complete construction by end-2016.

It, however, decided to build a larger theme park later, leading to delays in the opening. It has so far invested US$750mil (RM3.1bil) in the theme park.

CIMB also notes that Genting Malaysia is looking at some cost cutting initiatives, which include reducing incentives and rewards for major casino customers, in light of the 10% hike in casino tax beginning Jan 1.

“However, we believe this would likely to happen gradually as Genting Malaysia would not want to lose its major casino customers.

“As for staffing, Genting Malaysia has around 14,500 members currently and we understand the company does not intend to increase staff costs until the theme park opening date has been set,” the research house said.

It added that downside risk include the failure to open the theme park this year.

Petronas Dangangan BHD

By Affin Hwang Capital

Hold (maintained)

Target price: RM28.30

EARNINGS margin for Petronas Dagangan remains unchanged amid the government’s first revision of dealer commissions since 2008.

While the move would benefit petrol dealers by providing them a better margin of safety on the weekly fluctuation, Affin Hwang said this is largely earnings neutral on Petronas Dagangan’s standpoint.

The petrol retailer’s margin remains fixed at 5 sen/litre and 2.25 sen/litre for motor gasoline (mogas) and diesel respectively.

Affin Hwang maintains its earnings forecast for Petronas Dagangan and reiterates its “hold” rating and its discounted cash flow (DCF) based target price at RM28.30 with a WACC of 9.2% and terminal growth of 3%.

RON95 and diesel prices have been kept unchanged since March last year. The Pakatan Harapan government will resume floating the retail pump prices on a weekly basis based on the Automatic Pricing Mechanism (APM) but will cap the RON95 price at RM2.20/litre in the event the global oil prices recover.

Prices will be announced each Friday and take effect on Saturday.

The research house also believes that the newly-introduced RapidKL unlimited travel passes will place further pressure on the already challenging retail volumes, as it entices the working class to commute more due to its greater cost-saving.

Upside and downside risks include swing in retail and commercial sales volume. Downside risk could also arise from any unforeseen higher-than-expected spending for the current upgrading of stations’ infrastructure.

LBS Bina Group Bhd

By Public Investment Bank

Outperform (maintained)

Target price: RM1.16

PUBLIC Investment Bank expects the developer’s sales target of RM1.5bil for the year to be achievable, with RM1.14bil in properties still available for sale and five new projects worth RM1.82bil to be launched.

The research house retains its “outperform call” for LBS Bina Group with an unchanged target price of RM1.16, based on a 20% discount to fully diluted RNAV.

While the current figures may seem daunting yet again as initial launch plans and sales targets last year were scaled down in the later part of the year, Public Investment Bank thinks the group has sufficient momentum carried over from the unsold stock, coupled with the launch plans to see the 2019 sales target achieved.

“Unbilled sales remain at a healthy RM1.75bil, underpinning earnings visibility for the next two years at the very least.

“We continue to like LBS for its entrenched position as a leading player in the domestic mass market affordable housing segment, and still see it standing out amid the currently challenging operating environment given its product offering and price points,” the research house said.

Sales of RM1.53bil were achieved last year from eight projects with a total gross development value of RM1.2bil. The sales figure is a scale-down from initial plans of RM2bil and RM1.8bil.

The RM1.37bil or 90% of the sales done were concentrated in the Klang Valley. The primary concentration for LBS Bina Group this year will again be in the Klang Valley, with CyberSouth driving the bulk of the launches at RM870mil.

 

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