FREE Stock in Focus: RWM (16 Apr 2018) by AB Capital Securities

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Summary of Broker’s Recommendation
AB Capital Securities SELL 3.56 16 Apr 2018


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Our Partner Broker’s Analysis

RWM closure drags 2017 earnings

RWM’s net income tumbled 93% to PHP 242 Million, missing the consensus estimate of PHP 552 Million. The decline was primarily due to the closure of Resorts World Manila, which forced the company to close for 27 days in June after an arson attack that left 38 people dead. The closure suffered around PHP 60 Million in lost gaming revenue for each day of closure.

Gross revenues in 2017 ended at PHP 21.1 Billion, while EBITDA stood at PHP 3.5 Billion. Gross gaming revenues continued to recover after the loss of the 2nd floor gaming in June 2017, increasing 22% in the 4Q 2017 compared to the previous quarter and ending at PHP 17.1 Billion. Despite the improved profitability in the 4Q 2017, we still expect that RWM will face tougher competition, luring more junket operators, especially with its competitors in the Entertainment City (Solaire, Okada, City of Dreams).


Improved 4th Quarter (4Q) 2017 results

Despite the huge decline for the FY-2017, RWM booked a net income of PHP 279 Million in the 4Q 2017, reversing its PHP 480 Million loss in the 3Q 2017. Property visitation continued to improve averaging 27,000 in the 4Q 2017, up from 23,000 in 3Q 2017. Average occupancy rate for the three hotels likewise stayed high, hovering around the 80% mark, led by Remington Hotel (now Holiday Inn Express) at almost 90%.


Better figures expected this year

RWM’s management expects 2018 figures to improve as it starts to normalize its operations. RWM is optimistic with the partially opening of its Phase 3 development’s gaming area in the near future. This new facility will be called Grand Wing while the original facility will be called Garden Wing. The Grand Wing’s three hotel brands will open in phases beginning mid this year, with all three open by year end. Grand Wing will have three international luxury hotels – Hilton Manila, Sheraton Manila Hotel, and Hotel Okura Manila, adding approximately 940 rooms. It will also include new gaming and retail spaces, as well as six basement parking decks.


Our Partner Broker’s Recommendation

We are putting a SELL rating for RWM. Currently, RWM is trading at 15.4x EV/EBITDA 2018E, compared to the regional average of 12.1x.


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AB Capital Securities
AB Capital Securities

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