FY12 core EPS is 9% ahead of our expectation because of lower interest expense at Resorts World Manila (RWM). Underlying operations at its integrated resort were in line, though we had not expected the RWM's interest expense to halve from an interest-rate swap.
No change to our EPS as we believe the interest savings to be off and our RNAV-based target price is maintained. RWM remains a strong proxy for GDP growth in Metro Manila while GENHK’s cruise operations have a unique footprint in the Asian leisure-travel market. The re-rating of Norwegian Cruise Lines (NCL) since its IPO in Jan 13 is an additional catalyst. Maintain Outperform.
Operationally, GENHK's three units - Star Cruises, RWM and NCL - met our expectations except for significantly lower interest expense at its 50%-owned RWM (almost halved from US$61m last year to US$33m). As guided previously by management, RWM was hit by a weak win rate and higher operating costs in the second half with FY12 EBITDA only growing 9.5% yoy to US$235m despite a 14% increase in revenue to US$752m.
The bulk of its 43% net-profit growth in FY12 was hence led by financial leverage of lower interest expense. We expect EBITDA margins to narrow to 28% in FY13 from 31% in FY12 on the back of competition from the new Solaire casino. We expect RWM net profit to stay flat in FY13.
NCL a key earnings driver
Net profit at 42%-owned NCL grew 35% yoy to US$168m, as expected, on the back of operating leverage from a 2.6% increase in revenue to US$2.3bn. NCL is expected to spur much of GENHK's earnings in the next three years with the delivery of one new ship in Apr 13 and another in Jan 14. Each ship is expected to add US$150m to its EBITDA.
Asian cruising stable
Asian cruise revenue and EBITDA grew 5% in 2H12, aided by a recovering gaming business. We expect 16% EBITDA growth this year on the deployment of its newly-refurbished Gemini to Shanghai. (Read Report)
Source : CIMB Research