*** Genting Hong Kong (GENHK SP) involve in Resorts World Manila. ***

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Philippine Gaming in Talks With Genting, Three Others for casino project
By Max Estayo

Sept. 2 (Bloomberg) -- The Philippine Amusement & Gaming Corp. is in talks with Malaysia’s Genting Group. and three other parties for a casino project, Chairman Cristino Naguiat told reporters in Manila. Harrah’s Entertainment Inc. pulled out of talks, he said, without providing details.

*PHILIPPINE GAMING CHAIRMAN SAYS HARRAH'S PULLED OUT OF TALKS
*PHILIPPINE GAMING SAYS IN TALKS W/ INVESTORS FOR CASINO PROJECT

Well, the stock to watch for should be Genting Hong Kong (GENHK SP) given their involvement in Resorts World Manila.

Earlier results note sent out for reference.
Stock: Genting Hong Kong
Bloomberg: 678 HK/GENHK SP
Recommendation: Not Rated
Price: HK$2.33
Market cap: US$2,224m
Sector; Country: Cruise/Gaming; Hong Kong
Event: Post 1HFY10 results conference call

Key highlights are summarised below:
After stripping out US$14.4m one-off gains, GENHK turned in 1HFY10 core net loss of US$3m (-92% yoy) vs. consensus estimate of US$95.9m profit. According to Bloomberg, only UOBKayHian has a rated recommendation on the stock.

1H10 revenue grew 5% yoy thanks to i) a 4.7% uptick in capacity days and ii) 24% increase passenger ticket revenue. This was despite lower occupancy of 82% vs. 1H09’s 86%.

1H10 EBITDA grew a staggering 84% yoy, largely helped by last year’s significant cost cuts which more than offset this year’s higher average fuel prices.

Ex-EI, 1H10 pretax losses narrowed to US$2.6m vs. 1H09’s US$39m (-93% yoy), helped by the earlier mentioned cost cuts together with NCL’s turnaround and Resorts World Manila’s (RWM) positive contributions.

Key highlights from conference call:
RWM – beating all expectations. According to management, RWM's numbers exceeded all expectations. This was despite minimal marketing efforts so far. As a result, the entity declared a US$10m dividend during the period, suggesting an almost 100% payout to its 50:50 JV owners, GENHK and Alliance Global (AGI PM, Not Rated). It was even disclosed that on some days, wins could match any other casino in the world based on return on capital invested.

Since RWM’s entry, the overall Philippines gaming market has more than doubled YTD. This is another example of new properties growing gaming markets rather than cannibalising existing pie. Do recall, in Singapore’s case, the gaming pie expanded 70-80% in 2Q following Marina Bay Sands’ entry in end-Apr. Furthermore, Genting Malaysia (GENM MK, Neutral) also reported flat revenues (ex-good luck factor) during the period despite the distractions from the two new casinos in neighbouring Singapore.

RWM – update on progress. Management disclosed that the property is currently operating about 199 tables and some 1,200-1,300 slots. This is expected to hit 320 tables by year-end. Meanwhile, the 5-star Marriott Hotel is now fully opened and the all-suite Maxims is opening soon. Budget hotel, Remington, is currently being constructed and is slated for completing by end-1H2011. Upon completion, total hotel rooms are expected to hit 1,300. Meanwhile, RWM’s retail mall was completed in Jun-10. Most of the tenants are currently fitting out their outlets and this should complete by year-end.

New PAGCOR policies to further benefit RWM. PAGCOR’s new administration has issued two new policies which appear to benefit RWM – i) No more new gaming licences for private operators and ii) Plans to shut-down smaller gaming/slot parlours and poker clubs in non-tourist areas. These establishments are estimated to house some 5,000 slot machines. These two updated policies are indeed positive as it would i) help limit RWM’s competition to just the three other private gaming licence holders, apart from PAGCOR and ii) possibly divert some of the slot punting traffic into RWM.

Underlying cruise business also improving. On the cruise business, Star Asia and NCL’s operations appear to be turning around thanks to last year’s stringent cost cutting efforts. Even its Star Virgo, which is based in Singapore, yielded better numbers despite Singapore’s two IRs coming onstream. NCL’s numbers was further helped by stronger ticket pricing and booking trends. Meanwhile, NCLs’ occupancy rates were said to have inched closer to record levels. This is indeed a positive surprise for us. Going forward, management will continue focusing on improving asset utilisation. Citing an example, plans are underway to redeploy Star Aquarius (previously based in Hong Kong) to service the Penang market.

Taiwan – laying the foundation. Focusing on Taiwan, GENHK’s Taiwan routes have turned in a US$3-4m profit in 1H10, vs. last year’s US$5m loss. Efforts in Taiwan serve to position the group to explore land-based casino opportunities going forward. On the macro front, we learnt that a draft legislation is expected to go to the national assembly by year-end, followed by one or several referendums to seek local residents’ approval for the opening of casinos on the outlying islands. It was disclosed that a legal firm and a consultant firm has been appointed by the Ministry of Transport to spearhead efforts to bring about Taiwan’s first integrated resorts (IRs). Comments here appear consistent with our earlier understanding that Taiwan-led expansion efforts would likely be led by GENHK rather than affiliated company, Genting Singapore, which could have its eyes set for other potential new gaming jurisdictions such as Japan. Management is bullish about prospects for all. Strategically, management is observing cultural changes that could drive their Asian cruise business over the next five years. Meanwhile, it is also bullish on NCL’s outlook following the Jun-10 delivery of its new ship, the Norwegian Epic. For its land-based efforts, RWM is off to a very good start. With another identified site in the Manila Bay area, GENHK is well poised to tap into the transformation growth story in Philippines gaming. RWM’s gaming licence allows it to operate some 2,000 tables and 7,000 slots over the two sites. This suggests huge step-ups from the current 200 tables and 1,200+ slot counts.

In conclusion, we like GENHK’s land-based growth story via RWM and even the underlying core cruise business appears to be turning around in 1H10. Going forward, medium-term upside could also come from i) further entrenchment in the Philippines gaming market via its Manila Bay land project and ii) an opportunity to go into Taiwan if gaming liberalisation efforts pick-up pace. At this point, however, we believe that GENHK should trade at a discount to its pure gaming peers given the still dominating cruise earnings, which is more susceptible to fluctuations in economic prospects, especially in the US and oil prices. Also, RWM’s near-term prospects could be affected by the recent tourist hostage though impact is somewhat cushioned by its dominating local visitorship (about 60-70%).

Based on current consensus estimate, GENHK is trading at a forward P/E of 16-17x, just slightly shy of its regional gaming peer’s average of 18x. On an EV/EBITDA basis, however, current valuation appears demanding at 19-20x, well ahead of the sector’s average of about 9x. But we note that EV/EBITDA would not fully capture the potential of its star property, RWM which is contributing at the associate level. All-in, the stock is showing early sign of a turnaround story but near-term earnings growth prospects is still modest and very much cost-led. Over the medium-term, however, the stock could fetch premium valuations in view of its unique exposure into Philippines’ promising gaming market and increasing land-based gaming presence via a possible expansion into Taiwan as well.

daniel888

DJ MARKET TALK: Genting Hong Kong May Slip; Firm Not In Any Talks

0027 GMT [Dow Jones] Genting Hong Kong (S21.SG) may slip as cruise operator reveals it's not in talks for any acquisitions or investments, seeking to downplay investor expectations which sent share price soaring to almost 3-year high on Friday, +40.0% at US$0.42. Volume heavy at 367.9 million shares, or 25% of total market volume on SGX Friday. Interest in company strong of late, +64.7% since beginning August, as investors hopeful Genting Hong Kong, which has 50% stake in Resorts World Manila, would turn out to be another gaming success given strong performance of sister company Genting Singapore's (G13.SG) Resorts World Sentosa. (frankie.ho@dowjones.com)

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DJ MARKET TALK: Genting HK +4.8%; Earnings Growth Priced In - UOB

06/09/2010 11:01 - 0300 GMT [Dow Jones] Interest in Genting Hong Kong (S21.SG) not letting up even after Friday's 40.0% rally. Shares +4.8% at US$0.44 in active trade, accounting for about 36% of Singapore market's total volume. Cruise operator has already disclosed it's not in any talks for acquisitions, seeking to downplay investor expectations which sent share price soaring to almost 3-year high on Friday. UOB KayHian says rally has largely priced in company's earnings potential; "basically, (there's) no major new development to account for last Friday's big surge, although there is a good possibility that the company will de-gear significantly, given Resorts World Manila's strong cashflows." Company owns half of RWM. House reviewing Buy call, US$0.31 target. Orderbook quotes suggest shares may test US$0.47. HK-listed shares (0678.HK) also rising, last +9.6% at HK$3.19. (frankie.ho@dowjones.com)