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Stocks In Focus MY (Genting, Maybank, Telekom M’sia) – 27/02/15
Genting 4Q14 Earnings Fall 43%
Genting’s 4Q14 earnings declined 43.4 percent to RM273.8 million despite a 4.9 percent rise in revenue to RM4.6 billion. The lower profits were attributable to lower hold percentage in the premium players business for Resorts World Sentosa in Singapore and Resorts World Genting in Malaysia higher bad debt recovery in the UK casino business and lower palm product selling prices for Malaysia plantation business.
The group’s 49 percent-owned Genting Malaysia (GM) posted a slump in net profit by 22.6 percent to RM309.8 million, with subsidiary’s Malaysian leisure and hospitality business shrinking by 2 percent to RM1.4 billion as a result of the negative impact of redevelopment works at Resorts World Genting. Revenue from the GM’s UK operations decreased 17 percent to RM342.1 million while American operations’ revenue expanded 12 percent to RM264.4 million.
Genting’s current quarter’s profit before tax comprised a fair value loss on derivative financial instruments of RM415.3 million, of which RM389 million came from financial liabilities, as well as impairment losses which were offset partially by a gain on disposal of available-for-sale financial assets. The group said that the current quarter’s profit before tax also comprised Genting Malaysia’s project costs written off in respect of the unsuccessful application for new licences in New York State.
Significance: For the full-year, Genting’s top line grew 6.5 percent to RM18.2 billion while net profit fell 17.3 percent to RM1.5 billion. The group has announced a dividend of RM0.03 per share for 4Q14. Going forward, Genting Malaysia’s performance is likely to be affected by the ongoing construction while Genting Singapore’s results could be boosted by the opening of the new Genting Hotel Jurong in May.
More Challenging Market Conditions Anticipated: Maybank
After registering a laudable 4Q14 performance, Malayan Banking (Maybank) expects to keep up its performance for at least the first quarter of this year. However, it feels that capital market conditions will continue to be uncertain for the rest of the year and possible further weakness in capital market activities. Market challenges ahead include a protracted weakness in commodity prices, tighter consumer spending because of the implementation of the goods and services tax, and further net interest margin (NIM) compression.
For 4Q14, Maybank’s net profit rose by 11.5 percent to RM1.9 billion while revenue grew 16.8 percent to RM9.7 billion. The company’s FY14 earnings were a record RM6.7 billion due to growth in all areas of the bank, which were 2.5 percent higher year-on-year while its FY14 revenue increased from RM33.3 billion a year earlier to RM35.7 billion. Growth was supported by the expansion in NIM and fee-based income, especially in Malaysia.
The firm commented that are likely to improve since it was now on sounder footing after solving some problems in 2014. It expects 40 percent of its performance to come from regional operations in five years. The firm said that it required more time for the right deal with regard to Thailand while it anticipates that operations will begin in Myanmar this year. Nevertheless, the precise date will depend on the approval of the regulators there.
Significance: Due to the milder outlook for the year, the firm predicts that loan growth will moderate to 9 percent to 10 percent, in line with Malaysia’s gross domestic product which is expected to increase at a slower pace of 4.5 percent. It projects compression of its NIM to be at 10 to 12 basis points due to higher funding costs and competition. Nevertheless, despite the firm’s future challenges, it has stated a return on equity of 13 percent to 14 percent, which is on par with its guidance in FY14. Going forward, the firm will re-profile its clients to mitigate risks.
TM’s 4Q14 Profit At RM218.3m
Telekom Malaysia (TCM). registered a 36.6 percent decline in net profit to RM218.3 million for 4Q14, mainly because of a RM111.2 million one-off provision for a special optional retirement scheme for employees aged 55 and above in addition to the absence of high-speed broadband (HSBB) tax incentives during the year. However, its revenue rose 5.9 percent to RM3.2 billion, mainly due to higher contribution from its Internet, data and other services.
Average revenue per user (ARPU) for the fixed-line, Streamyx and UniFi segments was higher, thus signifying positive take-up and upselling activities and increased content buys. However some analysts are more concerned with the company’s wireless segment. The company has made a foray into the 4G mobile space by obtaining a 57 percent stake in loss-making P1 in September last year for RM560 million which will help it grow its wireless business.
The firm also announced that the government has awarded it the HSBB phase two (HSBB2) and sub-urban broadband (SUBB) projects. The estimated cost for HSBB2 and SUBB is RM1.8 billion and RM1.6 billion, respectively. More details would be disclosed later since negotiations with the government are still on-going. The firm added that HSBB phase one has been finished earlier than expected and phase two would be an extension of phase one’s coverage area, enabling more Malaysians to enjoy its UniFi.
Significance: Expecting a more difficult operating environment, the company has lowered its growth targets for revenue and earnings for 2015 to between 4 percent and 4.5 percent. It will be increasing its capital expenditure-to-revenue ratio to 20 percent in 2015 to upgrade its call network, access and support system. Despite the drop in net profit, analysts are generally positive on the company’s results since it registered a very strong set of earnings.
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