Tuesday, 26 August 2014

Genting Hong Kong

Uobkayhian on 26 Aug 2014

FY14F PE (x): 20.4
FY15F PE (x): 17.0
Still looking for its new groove. We expect Star Cruises will post a sequentially
narrower but continued operating loss in the seasonally stronger 2H14 as it continues
to fine-tune its fleet deployment strategy in preparation for the delivery of its two
newbuilds costing around US$900m each (scheduled for Oct 16 and Oct 17). The
strategy of deploying more capacity in the Hong Kong-China market raises costs
significantly which currently outweighs the revenue enhancement.
Maintain HOLD with a lower target price of US$0.40 (from US$0.43), after applying a
narrower 15% discount (previously 20%) to our RNAV/share, which already accounts
for muted earnings at Star Cruises (valuing Star Cruises’ at around the book value of
its vessels). Our target price implies 9.3x 2014F EV/EBITDA (adjusted for GENHK’s
stakes in Travellers and NCL). We note the valuation gap between our RNAV and the
implied market values has narrowed substantially with Travelers’ share price having
fallen 29% since its IPO.

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