Resorts World 3QFY08 : No surprises

• Revenue in-line with forecast
The company’s revenue 3Q08 revenue came in at RM1.23bn, which was 9.8% higher y-o-y but 1.3% lower q-o-q. 9MFY08 revenue increased 10.8% y-o-y to RM3.56bn, due mainly to better underlying performance of
the leisure and hospitality segment, which arose from higher volume of business and better luck factor from the premium player business. The numbers come in at 73% and 76% of our forecasted FY08 revenue and net profit respectively and as such, we are maintaining our estimates for FY 08 and going forward.
• Q-o-q PBT lower
Despite the higher revenue, the group recorded lower q-o-q PBT due to the previous quarter’s better performance in the leisure and hospitality segment and a gain on disposal of long term investment arising from foreign exchange translation.
• Diversity of income stream
The Group also announced that it was making a purchase of an equity stake in Walker Digital LLC, a US-based company which specializes in the development, protection and commercialization of gaming-related
patents, for USD69mn (RM249.8mn) which can be easily financed from its huge cash pile. While details are insufficient at this point in time to fully assess the impact of this acquisition to the Group, it is nonetheless a positive move given the increasing sophistication of customer needs for new and improved gaming technologies and offerings globally, and could act as a springboard for the diversity of its future income stream away from the domestic leisure and hospitality segment. Contributions for now however will be limited to dividend income and capital appreciation upon sale of the equity stake given its effective 10% stake in the company, which precludes its financial results from being consolidated.
• Call and target price unchanged
Economic conditions are understandably difficult and hence operating conditions may be somewhat challenged in the coming few quarters. We are nevertheless positive on the outlook for the Group in the longer term, and re-iterate our call on the stock.