Above expectations. Genting Malaysia’s (GM) FY09 core net profit came in above expectations, making up 110-111% of our and consensus forecasts. In FY09, GM recorded total EI loss of RM59.5m, coming from impairment losses of RM81.3m and gain on sale of investments of RM21.8m. We believe the main difference came from higher-than-expected investment income from gain on sale of investments. GM declared a final gross DPS of 4.3 sen (less 25% tax), bringing total gross DPS to 7.3 sen, or a net payout of 23.6% and net yield of 2%, which was slightly above our expectations which were based on net payout of 22.6%.
Genting Malaysia Berhad : Beating Expectations - 01/03/2010
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Unfortunately, we believe shareholders will not be rewarded with any additional capital management schemes in the near or medium term in the form of additional special dividends or treasury share distribution. This is owing to management’s commitment to conserve its cash to acquire an earnings-enhancing regional or global asset(s) in the medium term. However, management has yet to identify any potential acquisition candidates at this point in time, which will give it its targeted ROI of at least 15-20%.
As such, we believe investors would only get the normal dividend payment from Genting Malaysia in the medium term, which would be based on a net payout of 20-25%, translating to net yields of about 2% p.a..
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