Genting HK: Macquarie reiterates Outperform with US$0.60 target. Says even more positive on the company, following a meeting with mgt. Notes stock has declined 17% over the past mth on 2 key concerns, fuel price risk from Middle East crisis, and speculation on the NCL IPO not going through. Believes both concerns have been overplayed, and pullback provides attractive entry point...
On fuel price, highlights GENHK is not a pure cruise operator as ~50% earnings comes from gaming. Notes fuel requirements are only 20% of total cruise cost base, with 50-60% hedged. NCL also recently raised ticket prices in the US by 10%, implying flexibility to increase the fuel surcharge in a high demand envirmt.
On NCL IPO, mgt said 3 bankers have been hired for the deal and the IPO is going through as planned. Macquarie est the IPO could unlock US$2b or US12cts/sh for GENHK...
House maintains Resorts World Manila will be the key earnings driver, with visitors per day now doubled to 12k, vs 6k about 6mths back. Mgt expects 2011 to be a very strong yr.
Another catalyst for share price would be the possible sale of 4 laid up ships (Star Cruise) could yield ~US$500m, implying US6cts/sh.
Stock trades at 10x 2011E adjusted EV/EBITDA vs 15x for Macau gaming stocks and 11x for US Cruise stocks.
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