Here are 2 biggest culprits behind Genting Hong Kong's disappointing 1H earnings

Earnings forecast slashed by 4%.

According to CIMB, at 11% of its full-year core EPS compared to seasonally-adjusted expectations of 13%, 1H13 results were below expectations because of Star Cruises and tax. The contribution of Travellers and NCL, which is expected to provide 92% of full-year core net profit, came in line.

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We cut our EPS forecasts by 2-4% as we adjust our cost estimates for Star Cruises. Our RNAV target price is cut for the lower valuation of the Asian cruise business, still pegged to 8x EV/EBITDA.

Although Star Cruises's 1H13 revenues showed a healthy 23% increase from new routes based out of Shanghai, it was not enough to offset the start-up costs involved and the added depreciation of the Gemini.

1H13 operating losses widened to US$15m compared to -US$0.7m last year. However, we estimate that EBIT would have been in positive territory of US$8m adjusting for the lower win rate of 3.9% and bad weather.

We expect Star Cruises to end the year with an operating profit of US$62.2m, flat yoy. We remain positive on the new emphasis on duty-free sales to complement gaming which should be seen from FY14 onwards.

Travellers in line
Resorts World Manila (RWM) generated 1H13 revenue of US$468.9m. 1H13 EBITDA came in at US$109m, up 40% yoy. It does not look like the business was affected by competition from the new Solaire Casino that opened in 2Q13.

Reading through from Solaire's numbers, it looks like it is generating gaming revenues at half of RWM's level without any signs of destructive competition.

NCL main earnings driver
Contribution from NCL doubled to US$33.4m from the contribution of the new Norwegian Breakaway after stripping out refinancing and IPO costs. We expect profit to double again in FY14 from interest cost savings and contribution from the new Norwegian Getaway.

Following the IPO and recent secondary offering of NCL and the US$70.9m of dividends received from Travellers in May 2013, GENHK is estimated to be in a net cash position of US$250m.