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WEALTH SECURITIES INC

Equity Research

Leisure & Resorts World


Corp (LR)
BUY

Gaming

Target Price: P15.15

Earnings Update

29 Apr 2015

2014 results slightly off but show strong core businesses


based
theincome
previous
days close
and translates
2014on
net
doubles
to P750m.
LR reported 2014 net income of P750m,
up 132% YoY. Net revenues rose 26% to P3.8b on the back of significant growth
from its E-bingo games, First Cagayan Leisure and Resort Corp (FCLRC)
service and hosting fees, and LRs share in the rent the City of Dreams Manila
property which it started booking this year. However, while operating expense
growth was slower (+12% YoY) than revenue growth and thereby boosti ng
margins, overall opex was 13% higher than our estimates. Thus, LRs reported
net income accounted for just 96% of our full-year forecast.
Core businesses deliver strong performance. FCLRC posted a 57% growth in
revenues owing to the growing number of operational locators (now at 84 vs. 71
at the start of the year). As such, FCLRCs 2014 net income grew 68% to P378m
from P225m in 2013. Net income from the retail division grew by 93% to P198m
on the back of a 30% rise in revenues from its E-bingo business which more than
offset the 5% decline in its traditional bingo business. Overall net revenues were
higher by 8% than our full-year estimate.
New businesses post profits. Prime Investment Korea Inc, LRs wholly owned
junket operation unit and 51%-owned Hotel Enterprises Philippines, have both
turned around with a P108m net profit in 2014 from a loss of P24m in 2013. AB
Leisure Global Inc, LRs subsidiary entitled to a share in the rent received by
Belle Corp (BEL) and the EBITDA of Premium Leisure Corp (PLC, Buy) from
CoD Manila, likewise provided an additional P53m in net income for 2014 vs a
P52m loss in 2013. ABLGIs turnaround is due to the commencement of the
rental payments by Melco Crown (Phils) Resorts Corp (MCP, Buy) to BEL.

Company Snapshot
Price (P)
Shares O/S (m)
Market Cap (Pm)
52-wk price range (P)
12-mo ave T/O (Pm)

9.20
1,200
11,039
6.50-12.28
14.825

Major Shareholders
Alfredo Benitez
Zoraymee Hldg. Inc.
Grand Shares, Inc.

11.2%
11.1%
10.0%

Free Float

62.6%

Price Performance
LR
PSEi

1m
+4.8%
+0.1%

6m
-2.7%
+11.6%

12m
+17.6%
+19.4%

Big jump in margins. Operating expense grew only 12% YoY, thereby making
2014 operating margin stand at 21% from 12% in 2013 as the decrease in
payouts and contracted services costs offset the rise in rental and salary
expenses. However, opex was still 13% higher than our estimate and thus
explains the slight underperformance of LRs earnings vs. our full-year estimate.
There were dramatic increases in costs for representation and entertainment,
transportation and travel, contracted services and interest charges.
Reiterate BUY with TP of P15.15: In light of the continued strong performance
of its core operating subsidiaries and further momentum that should arise with
the full operations of CoD Manila, we believe, LR should remain on a strong
growth path. We reiterate our BUY call on LR with a TP of P15.15. This offers a
65% potential share price upside and translates to an undemanding valuation of
10.6x 2015E income and 7.1x 2016E income.
Financial and Valuation Highlights
in Pm
Net Revenues
Operating Income
Net Income
EBITDA
EV/EBITDA (x)
EPS (P)
EPS growth (%)
P/E (x)

2012A
2,809
218
279
344
10
0.22
41.8

2013A
3,035
352
324
476
6
0.27
22.7%
34.1

Source: Wealth Research estimate, company data


A - Actual results
E - Wealth estimates

2014A
3,832
819
750
966
9
0.48
77.8%
19.2

2015E
5,122
2,486
1,699
2,458
10
1.42
195.8%
6.5

2016E
6,050
3,402
2,541
3,380
11
2.12
49.3%
4.3

Analyst : Matthew Sy-Tan


T: 634.5038 local 8168
E: matthew.sytan@wealthsec.com
Analyst : Jason Lee
T: 634.5038 local 8165
E: jason.lee@wealthsec.com

18 Nov 2014

Leisure & Resorts World Corp

Fig.1 Interim Results

YoY
2014A 2013A
2014E
change
(Pm)
(Pm)
(Pm)
(%)
Net Revenues

% of
2014E

3,832

3,035

26

3,732

103

Operating Income

819

352

133

1,061

77

Pre-tax Net Income

1091

504

116

1,166

94

Net Income

934

424

120

974

96

Net Income to common


shareholders (before
preferred dividends)

750

324

132

802

94

Diluted Earnings/(Loss)
Per Share

0.483

0.206

134

0.55

88

Source: Company Data, Wealth Securities Estimates

Wealth Securities, Inc.

Disclaimer: T h e

information and opinions in this report were prepared by Wealth Securities, Inc. The information herein is
believed to be reliable and has been obtained from public sources believed to be reliable. W ealth Securities makes no
representation as to the accuracy or completeness of such information.
Wealth Securities may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with
the view taken in this research re port. In addition, others within Wealth Securities, including traders and sales staff, may
take a view that is inconsistent with that taken in this research report.
Opinions, estimates and projections in this report constitute the current judgment of the a uthor as of the date of this report.
They do not necessarily reflect the opinions of Wealth Securities and are subject to change without notice. Wealth Securities
has no obligation to update, modify or amend this report or to otherwise notify a recipient t hereof in the event that any
opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of
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Wealth Research Analysts

Rating System

Ricardo P. Puig
Research Head
Strategy, Conglomerates, Property,
Telecommunications
rpuig@wealthsec.com
Tel: (+632) 634-5038 ext 8128

Wealth Securities Research follows the following rating


definition

Laura Dy-Liacco
Deputy Head of Research
Utilities, Conglomerates
ldyliacco@wealthsec.com
Tel: (+632) 634-5038 ext 8153
ND Fernandez
Banking
nd.fernandez@wealthsec.com
Tel: (+632) 634-5038 ext 8158
Matthew S. Tan
Consumer, Gaming, Services
matthew.sytan@wealthsec.com
Tel: (+632) 634-5038 ext 8168
Jason Lee
Construction, Media
jason.lee@wealthsec.com
Tel: (+632) 634-5038 ext 8165

Buy

We expect total return of more than 12% in the


next 12 months

Hold

We expect total return of -12% to 12% in the


next 12 months

Sell

We expect total return of less than -12% in the


next 12 months

Wealth Securities Inc


2103 A&B, East Tower, PSE Center
Exchange Road, Ortigas Center
Pasig City 1600
Tel: (+632) 634-5038
Fax: (+632) 634 5043
www.wealthsec.com