November 19, 2014

RWM’s net profit weakens in 3Q13

In a short press statement today, Travellers International Hotel Group Inc (RWM) reported 9M14 net income of P4b, up 12% YoY and implying a 12% decline in 3Q14 after growing by 25% in 1H14. This is despite the recovery in both gaming revenues to P7.2b (+6%) during the quarter after falling 22% YoY in 1H14. Hotel and other revenues fell by another 8% during the quarter after dropping 4% in 1H14. These bring the 9M14 gaming revenues to P20.78b (down 14%) and other revenues to P2.46b (-5%).

RWM also reported a sharp recovery in EBITDA during the quarter when it grew 42% YoY to P2.8b and bring the 9M14 number to P7.49b (+15% YoY). This brings the EBITDA margin to 35% in 3Q14 and 32% in 9M14 from 31% in 1H14. However, costs have offset the EBITDA gains leading to the 12% net profit drop in 3Q14.

Our take: RWM’s 9M14 net income of P4b in 9M14 accounted for 73% of our full-year estimate. It remains to be seen if the recovery in gaming revenues in 3Q14 and EBITDA can be sustained in 4Q14 as the company will be facing tighter competition with the opening of City of Dreams Manila and the expanded Solaire Resorts.

While visitations can get a boost during the holiday seasons, costs may be under pressure as the company will have to spend more for promotions and marketing. We write more on the company’s results after the 19 Nov teleconference briefing of its parent firm Alliance Global Group Inc (AGI). We maintain our HOLD rating on RWM. – WealthSec