We initiate coverage on Genting Hong Kong (GENHK) with a BUY call and sum-of-the-parts (SOTP) based target price of US$0.28. GENHK’s operational earnings turned around from 2H09 and are set to sail through 2012, propelled by a recovery in the North American and Asian cruise operations, and debut on the Manila casino scene. Sailing into a highly cashgenerative period, GENHK trades at only 6.8x and 9.3x adjusted 2011 EV/EBITDA and fully diluted PE multiples, well below global peers’.
Cruise operations all shaped up. The cruise operations are finally shipping out impressive profits, thanks to active fleet and aggressive cost management, and improving industry dynamics. The 50%-owned US division Norwegian Cruise Line (NCL) now features yields comparable to that of the world’s largest cruise operators, and the Asian division Star Cruises continues to grow its gaming revenues as new markets and strong gaming growth in Hong Kong have buffered rising competition from land-based casinos in Singapore.
RWM shipping back impressive returns. We understand that 50%-owned Resorts World Manila (RWM) has been raking in a daily gross win of close to US$1.0m ytd, which could deliver an EBITDA payback period of under five years on GENHK’s cash investment of US$335m. RWM is projected to deliver net profits of US$39.1m and US$67.7m to GENHK in 2010-11.
Stock Impact
Rising tide for earnings. GENHK reported a half-yearly core net profit of US$22.7m in 2H09, the first since 2H07, and we project its net profit to rise to US$95.9m and US$145.5m in 2010-11. 2H09’s impressive turnaround reflects a successful business and cost restructuring exercise at the US and Asian cruise operations. 2010-11 earnings are further propelled by GENHK’s maiden foray into the Manila casino market.
Full impact of cost-cutting initiatives to be felt in 2010. Star Cruises will benefit from the following: a) the absence of 2009’s US$9m retrenchment costs, and b) US$15m annual savings by relocating its main terminal from Klang, Malaysia to Manila, the Philippines. Meanwhile, NCL has been steadily reducing its net cruise cost (excluding fuel) per available cruise day from US$120-130 to US$107.80 in 1Q10, bringing its net cruise cost closer to that of industry leaders Carnival Corp (CCL) and Royal Caribbean Cruise (RCL).
Key initiatives undertaken: a) right-sizing its cruise operation serving Hawaii (from three ships to one), b) reflagging US-flagged ships to become international-flagged ships (thus eliminating the high salary cost requirement of US-flagged ships), eg payroll per cruise day dropped from US$39.70 in 2008 to US$34.40 in 2009, c) disposing of older (and lower-yielding) cruise ships, and d) significantly reducing interest costs........
We initiate coverage on Genting Hong Kong (GENHK) with a BUY call and sum-of-the-parts (SOTP) based target price of US$0.28. GENHK’s operational earnings turned around from 2H09 and are set to sail through 2012, propelled by a recovery in the North American and Asian cruise operations, and debut on the Manila casino scene. Sailing into a highly cashgenerative period, GENHK trades at only 6.8x and 9.3x adjusted 2011 EV/EBITDA and fully diluted PE multiples, well below global peers’.
Cruise operations all shaped up. The cruise operations are finally shipping out impressive profits, thanks to active fleet and aggressive cost management, and improving industry dynamics. The 50%-owned US division Norwegian Cruise Line (NCL) now features yields comparable to that of the world’s largest cruise operators, and the Asian division Star Cruises continues to grow its gaming revenues as new markets and strong gaming growth in Hong Kong have buffered rising competition from land-based casinos in Singapore.
RWM shipping back impressive returns. We understand that 50%-owned Resorts World Manila (RWM) has been raking in a daily gross win of close to US$1.0m ytd, which could deliver an EBITDA payback period of under five years on GENHK’s cash investment of US$335m. RWM is projected to deliver net profits of US$39.1m and US$67.7m to GENHK in 2010-11.
Stock Impact
Rising tide for earnings. GENHK reported a half-yearly core net profit of US$22.7m in 2H09, the first since 2H07, and we project its net profit to rise to US$95.9m and US$145.5m in 2010-11. 2H09’s impressive turnaround reflects a successful business and cost restructuring exercise at the US and Asian cruise operations. 2010-11 earnings are further propelled by GENHK’s maiden foray into the Manila casino market.
Full impact of cost-cutting initiatives to be felt in 2010. Star Cruises will benefit from the following: a) the absence of 2009’s US$9m retrenchment costs, and b) US$15m annual savings by relocating its main terminal from Klang, Malaysia to Manila, the Philippines. Meanwhile, NCL has been steadily reducing its net cruise cost (excluding fuel) per available cruise day from US$120-130 to US$107.80 in 1Q10, bringing its net cruise cost closer to that of industry leaders Carnival Corp (CCL) and Royal Caribbean Cruise (RCL).
Key initiatives undertaken: a) right-sizing its cruise operation serving Hawaii (from three ships to one), b) reflagging US-flagged ships to become international-flagged ships (thus eliminating the high salary cost requirement of US-flagged ships), eg payroll per cruise day dropped from US$39.70 in 2008 to US$34.40 in 2009, c) disposing of older (and lower-yielding) cruise ships, and d) significantly reducing interest costs........
2012, propelled by a recovery in the North American and Asian cruise operations, and debut on the Manila casino scene. Sailing into a highly cashgenerative period, GENHK trades at only 6.8x and 9.3x adjusted 2011 EV/EBITDA and fully diluted PE multiples, well below global peers’.
Genting Hong Kong (GENHK) - a BUY call and based target price of US$0.28. GENHK’s operational earnings turned around from 2H09 and are set to sail through
•
Norwegian Cruise Line (NCL) now features yields comparable to that of the world’s largest cruise operators, and the Asian division Star Cruises continues to grow its gaming revenues as new markets and strong gaming growth in Hong Kong have buffered rising competition from land-based casinos in Singapore.
Cruise operations all shaped up. The cruise operations are finally shipping out impressive profits, thanks to active fleet and aggressive cost management, and improving industry dynamics. The 50%-owned US division
•
RWM shipping back impressive returns. ...50%-owned Resorts World Manila (RWM) has been raking in a daily gross win of close to US$1.0m ytd, which could deliver an EBITDA payback period of under five years on GENHK’s cash investment of US$335m. RWM is projected to deliver net profits of US$39.1m and US$67.7m to GENHK in 2010-11.
Stock Impact
•
Rising tide for earnings. GENHK reported a half-yearly core net profit of US$22.7m in 2H09, the first since 2H07, and we project its net profit to rise to US$95.9m and US$145.5m in 2010-11. 2H09’s impressive turnaround reflects a successful business and cost restructuring exercise at the US and Asian cruise operations. 2010-11 earnings are further propelled by GENHK’s maiden foray into the Manila casino market.
•
Full impact of cost-cutting initiatives to be felt in 2010. Star Cruises will benefit from the following: a) the absence of 2009’s US$9m retrenchment costs, and b) US$15m annual savings by relocating its main terminal from Klang, Malaysia to Manila, the Philippines. Meanwhile, NCL has been steadily reducing its net cruise cost (excluding fuel) per available cruise day from US$120-130 to US$107.80 in 1Q10, bringing its net cruise cost closer to that of industry leaders Carnival Corp (CCL) and Royal Caribbean Cruise(RCL).
*Reporting Currency in USD Important: ShareJunction obtains our finance data from a third party. Check financial year before use. EPS values are recorded up to two decimal points.
Alliance Global Group, Inc. (AGI), the holding company of tycoon Andrew Tan, posted a 12 percent gain in consolidated net income to P2.22 billion in the first quarter of 2010.
In a disclosure to the Philippine Stock Exchange Friday, AGI said it’ net income attributable to shareholders rose 20 percent to P1.65 billion from P1.37 billion a year ago.
Consolidated revenues during the three-month period reached P10.50 billion, up 19 percent from P8.86 billion in the same period last year.
AGI’s property arm, Megaworld Corporation, accounted for 46 percent of revenues during the period, compared to 43 percent from the consumer business, primarily through Emperador Distillers and Golden Arches Development Corporation, master franchise holder of McDonald’s in the Philippines.
Earnings before interest, taxes, depreciation and amortization in the first quarter of 2010 amounted to P3.30 billion, up from P2.80 billion a year ago.
“Our first quarter results show AGI’s continued strength in the industries it operates in. We believe that we are reaping the benefits of the business decisions we made in the last couple of years,” said AGI President Kingson Sian.
Sian was referring to expansion efforts under AGI’s real estate and consumer businesses, as well as its recent foray into the tourism industry under a joint venture with Genting Hong Kong Limited (formerly named Star Cruises Limited of Hong Kong), through AGI subsidiary Travellers International Hotel Group, Inc.
“While this is the first full quarter that we are reporting our share in the net profits in Resorts World Manila and, given that the facility is not yet fully complete, we are quite pleased by the early indication of the potential of the business,” said Sian.
He added that “we remain committed to building a truly world-class facility, one that can be considered a hallmark in Philippine tourism.”
When the new Norwegian Epic hosts Macy's Fourth of July Fireworks in New York this summer, NBC-TV will broadcast the show live on prime-time national television.
It's a fitting U.S. debut for the 4,100-passenger Epic, which will be Norwegian Cruise Line's biggest and most expensive ship ever. NCL Corp., the cruise industry underdog, is betting big on glitzy entertainment to stand out from its far larger competitors, Carnival Corp. and Royal Caribbean Cruises Ltd.
``It's a perfect way to introduce the Norwegian Epic -- with its big focus on entertainment,'' says Kevin Sheehan, who in November 2008 became chief executive officer of Miami-based NCL Corp., the parent of Norwegian Cruise Line.
The $1.2-billion Epic's high-profile acts, which include the Blue Man Group, Cirque Dreams and Legends in Concert, will replace the standard fare -- two shows a night in a main theater.
That's in keeping with Norwegian's ``freestyle'' concept of cruising, which boasts of letting passengers do what they want when they want.
The balcony-laden Epic has an ice bar and radically different curve-shaped cabins. A private ``ship within a ship'' spans the top two decks with 60 suites and villas dedicated to elite guests.
The ship has 19 restaurants and an embarrassment of night spots, including Spice H2O, where a daytime pool floor will rise in the evening and morph into an adults-only dance floor with a beach-club theme.
``The Epic coming out in July will be the cruise event of the year,'' says David Brams, president of World Wide Cruises, a travel agency in Fort Lauderdale.
But the biggest star at Norwegian may be Sheehan himself.
The 56-year-old newcomer to the close-knit industry appears to be on track to do what a parade of cruise veterans before him could not: Turn a profit and steer the 43-year-old company on a viable path between giant Carnival Corp. and Royal Caribbean Cruises.
``This is a brand that, to me, really has a lot of value that has never fully been realized,'' says Sheehan, a blunt-spoken, red-headed Irishman from New York. His track record includes running the giant vehicle-services division at Cendant Corp., teaching accounting and finance at Adelphi University, and helping found Telemundo, the Spanish-language television network.
For 2009 -- perhaps the cruise industry's worst year ever -- NCL posted net income of $67.2 million. It was NCL's first profitable year since 2005.
Sheehan came on the scene at NCL as chief financial officer in November 2007 as Apollo Management became its controlling shareholder. Apollo, a New York-based private equity giant, owns 37.5 percent of NCL, but it wields voting control. The other owners are TPG, another big private equity firm, with 12.5 percent and Genting Hong Kong, formerly called Star Cruises, with 50 percent.
Sheehan had left Cendant in 2005, where he was chairman and chief executive of the vehicle services division, which included Avis and Budget rental car businesses. He'd pocketed an eight-figure severance package as the company was split up. He and his wife had bought a place in the Hamptons, and he was teaching at Adelphi and doing consulting. Henry Silverman, Cendant's former chairman and CEO whom Sheehan had worked with for more than 25 years, nudged Sheehan to explore the NCL assignment. Silverman was a consultant to Apollo and has since become its chief operating officer.
LISTED Alliance Global Group Inc. (AGI) said profits grew 23 percent to P4.8 billion.
The holding firm for investments in the real estate, liquor manufacturing, fast-food and tourism sectors of businessman Andrew Tan grew profits by 23 percent last year on the back of strong sales.
In a statement, AGI said net income last year amounted to P4.8 billion from P3.9 billion in 2008. Revenues during the period grew 8 percent to P38.8 billion, mainly from the real-estate business through Megaworld Corp.
Aside from this, AGI has interests in brandy maker Emperador Distillers Inc., Golden Arches Development Corp. (holder of the Philippines master franchise of McDonald’s), and recently ventured into the development of integrated tourism resorts through Travellers International Hotel Group, Inc.
AGI’s consumer business accounted for 41 percent of revenues while the balance came from other income.
“Alliance Global made good progress last year amid challenging market conditions,” said AGI president Kingson Sian in a statement.
“While we expect the markets will become more competitive this year, especially in the real estate segment, the same commitment has provided us with the ability to act faster and become more agile in spotting new business opportunities and adapting to market changes,” he added.
AGI continued to expand its businesses in 2009, highlighted by the opening of Resorts World Manila, an integrated tourism resort located within Megaworld’s Newport City development, across Terminal 3 of the Ninoy Aquino International Airport in Pasay.
In 2008, AGI, through Travellers International, inked a joint-venture deal with Star Cruises Ltd., now Genting Hong Kong Ltd., to build Resorts World Manila in Newport City and Resorts World Bayshore City within the 90-hectare Bagong Nayong Pilipino Entertainment City Manila.
Travellers is earmarking over $500 million to develop Resorts World Manila, which includes the 172 all-suite Maxims Hotel, the 342-room five-star Marriott Hotel, and a budget hotel called Remington. The three hotels will have a cumulative room count of about 1,500.
Travellers International has committed to invest at least $1.1 billion in developing the two Resorts World projects over the next five years.
Genting Hong Kong, is the world’s third-largest cruise line operator and is a member of the Malaysian conglomerate Genting Bhd.
Resorts World Manila will feature a grand mall with a sky roof-covered piazza, world-class theater and gaming facility, and other retail, leisure and entertainment highlights. The entire project, once completed by 2011, will generate more than 10,000 direct and indirect jobs.
The five-star Marriott Hotel is now open for business, as is a portion of the gaming and entertainmentResorts World Bayshore City is envisioned as a themed development with about 2,500 hotel rooms, along with leisure, retail and entertainment facilities.
NCL Corp., hurt by currency exchange fluctuations, posted a first-quarter net loss of $16.1 million compared with a year-ago profit of $5.2 million.
But a key measure, EBITDA -- earnings before interest, taxes, depreciation and amortization -- rose to $58.1 million in the first quarter from $50.9 million a year earlier, according to a Thursday earnings report.
The Miami-based parent of Norwegian Cruise Line is bouncing back better than its peers from the depressed pricing that hit the industry in the economic downturn. Norwegian's net yield -- or the revenue generated per berth per day -- rose 5.7 percent from the year-ago quarter, a solid rebound, and well above the 2.6 percent net yield improvement that Royal Caribbean Cruises posted Wednesday.
``After the year of suppressed pricing we experienced in 2009, we were able to start the new year strong,'' said Kevin Sheehan, chief executive officer of Norwegian, which is jointly owned by Apollo Management and TPG, both large private equity firms, and by Genting Hong Kong, formerly known as Star Cruises.
NCL said the volume of bookings continues to improve from last year, and pricing is expected to continue to climb from year-earlier levels.
First-quarter revenue fell 1.9 percent to $416.5 million from $424.5 million a year earlier, reflecting the removal from the fleet of the Norwegian Majesty last October.
Sheehan said continued efforts to control costs are paying off. Net cruise cost for the first quarter declined 3.5 percent to $261.6 million, despite higher fuel costs.
The cruise line is preparing for the July debut of Epic, its new 4,200-passenger megaship, which includes the first ice bar at sea and a 31,000-square foot spa, and 19 restaurants. It recently announced a $20-million upgrade to Great Stirrup Cay, its private island for passengers.
rose 5.7 percent from the year ago quarter, a solid rebound, and well above the 2.6 percent net yield improvement that Royal Caribbean Cruises posted Wednesday. ``After the year of suppressed pricing we experienced in 2009, we were able to start the new year strong,'' said Kevin Sheehan, chief executive officer of Norwegian, which is jointly owned by Apollo Management and TPG, both large private equity firms, and by Genting Hong Kong, formerly known as Star Cruises. NCL said the volume of bookings continues to improve from last year, and pricing is expected to continue to climb from year earlier levels. First quarter revenue fell 1.9 percent to $416.5 million from $424.5 million a year earlier, reflecting the removal from the fleet of the Norwegian Majesty last October
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