Genting Bhd (GENT) reported a headline net loss of RM130.7m for 3QFY20 compared to a net profit of RM305.7m in 3QFY19 due to lower revenue as certain operations remained closed while others were running at reduced capacity. An impairment relating to assets in the UK and Bahamas amounting to RM206.1m was recognized in the current quarter. Having adjusted out nonoperating items, GENT managed to deliver a marginal core net profit of RM23m in 3QFY20 versus RM578m in 3QFY19. Cumulative 9MFY20 results were better-than-expected as core net loss of RM329.5m accounted for 54% and 50% of our and consensus full-year forecasts respectively. We lower our net loss forecast for FY20F by 46% after factoring in higher profit contribution from Genting Singapore (GENS) and the oil & gas segment while retaining our FY21-22F earnings forecasts. Given the upward revision in our Genting Malaysia’s (GENM) TP, we raise our SOTP-based TP for GENT to RM4.60.

• 3QFY20 revenue fell 38% YoY. Malaysia’s leisure & hospitality business delivered a 34% drop in revenue due to the impact of Covid-19 which resulted in lower business volume and reduced capacity. Contribution from Singapore, UK & Egypt and US & Bahamas fell by more than 50% YoY on lower business volume while some casino operations remained closed throughout the quarter. Plantation was the best-performing division, posting a 43% growth in revenue on higher palm product prices. Meanwhile, power revenue was dragged by lower net generation as a result of an unscheduled plant shutdown. The oil & gas segment was affected by lower crude oil prices.

• 3QFY20 adjusted EBITDA was down 44% YoY. The leisure & hospitality segment posted a 53% decline in profit to RM801.1m. Malaysia and Singapore delivered a combined profit of RM983.3m but this was partly offset by losses incurred in the UK & Egypt and US & Bahamas. Meanwhile, plantation profit more than doubled on higher revenue and lower unit cost.

• Outlook. Despite news on vaccine breakthrough, we believe international borders will remain closed and travelling will be restricted in the near term until vaccines are made available. Therefore, operations of the leisure & hospitality segment should continue to face challenges over the next 1 year. Although FY2021F earnings are expected to recover sharply on a YoY basis owing to low base factor, we are not expecting businesses to revert to normalcy until FY2022F.

Source: PublicInvest Research - 27 Nov 2020