Chart: Resorts' weekly chart as at Oct 2
Resorts has recently announced its result for QE30/6/06. The turnover increased 9.0% q-o-q to RM899 mil while pre-tax profit jumped 28.8% q-o-q to RM257 mil. Net profit has however declined by 27.4% q-o-q to RM177 mil because Resorts had written back RM101 mil of over-provision in tax in respect of prior years in QE31/3/06, which resulted in a tax credit of RM43.8 mil. This compared with a tax charge of RM80.3 mil for the QE30/6/06.
Resorts’ turnover for QE30/6/06 is 2.5% lower than the turnover for QE30/6/05 because the latter includes an exceptional gain of RM113.3 mil from the disposal of London Casino International (which was taken in at the "turnover" level). This exceptional gain plus other gains totaling RM18.1 mil from other investments (the latter were taken in at the "pre-tax profit" level) has resulted in Resorts reporting a pre-tax profit of RM399 mil for QE30/6/05. As such, when we compared the pre-tax profit for QE30/6/06 with the pre-tax profit of QE30/6/05, we will see a 35.5%-drop. The net profit has similarly dropped 45.8% for the two periods. See the table below for Resorts' financial results for QE30/6/06, QE31/3/06 & QE30/6/05.
Based on the EPS of 16.18 sen for QE30/6/06, Resorts' annualized EPS will be about 64.72 sen. At this morning's closing price of RM10.80, Resorts is now trading at a PE of 16.7 times. Resorts' net profit has been depressed by its share of losses incurred by its associate, Star Cruise, which amounted to RM57.5 mil for QE30/6/06 and RM46.5 mil for QE31/3/06. If the performance of Star Cruise can improve over time, Resorts' EPS will also improve.
In conclusion, Resorts' current weakness may present a good buying opportunity. A good entry may be between RM10.00 and RM10.50.
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