Genting Malaysia's (GENM) 3QFY24 net profit surged by over 200% YoY to RM569.2m mainly on the back of unrealised foreign exchange (forex) translation gain of RM601.8m. Stripping all other non-operating items, core net profit stood at RM193m, down 11.8% YoY due to higher operating expenses while revenue was flattish. For 9MFY24, core net profit of RM479.3m came in below our and market expectations, accounting for 63% and 68% of full-year estimates respectively. We cut our FY24-26F earnings forecasts by an average of 10% to factor in higher operating costs. Consequently, our SOTP-based TP is reduced to RM2.80. Given an upside potential of 32%, we maintain our Outperform call.

• 3QFY24 revenue up marginally by 1.5% YoY, largely coming from the UK & Egypt while revenue from Malaysia and the US & Bahamas was flat. The UK & Egypt segment reported a 9% increase in revenue due to higher business volume. Malaysia remained its largest contributor, making up 61% of total revenue.
• 3QFY24 core net profit was down 11.8% YoY. Headline net profit was largely boosted by net unrealised forex translation gains of RM601.8m in 3QFY24. Excluding this impact, adjusted EBITDA would have been lower by 6%. The decline in earnings was due to higher operating expenses incurred by Malaysia and the US & Bahamas.
• Outlook. We expect visitor arrivals to continue to improve after the Malaysian government granted an extension of visa exemption for Chinese tourists until end 2026. Prior to the Covid-19 pandemic, Malaysia attracted total tourist arrivals of about 26m, of which 12% were Chinese tourists. As of August 2024, Malaysia recorded a total of 16.45m tourist arrivals, representing a growth of 29.5% YoY. For full-year 2024, Malaysia is targeting a total arrivals of 27.3m. This should augur well for the tourism and hospitality industry and we expect Resorts World Genting to post stronger results in the final quarter due to seasonal spending and travelling activities.

Source: PublicInvest Research - 29 Nov 2024