Review

• Genting Berhad’s (Genting) 1H24 core profit of RM883.9mn came in below our expectation but within consensus forecast. The variance was largely due to lower-than-expected contribution from Genting Singapore. For this quarter, the company declared a first interim dividend of 6sen/share.

• Genting’s 1H24 revenue and adjusted EBITDA expanded by 14.5% and 25.0% YoY to RM14.3bn and RM4.8bn respectively. The increase came mainly from all gaming units except Empire Resorts as well as the plantation division.

• GENS’ 1H24 revenue and adjusted EBITDA rose 25.5% (+32.1% in ringgit term) and 26.2% YoY (+32.2% in ringgit term) to S$1.4bn and S$570.5mn respectively. However, the 2Q24 EBITDA was weakened, down 21.3% to S$201.3mn, on the back of 4% decline in revenue. Management attributed this to geopolitical headwinds, together with high transport and accommodation costs.

• GENM’s1H24 adjusted EBITDA rose 36.9% to RM1.4bn underpinned by 14.2% growth in revenue. All gaming units reported stronger gaming volumes, especially Malaysia operations, thanks to higher visitor arrivals and recovery in win rate. However, at associate levels, Empire Resorts’ losses expanded to RM136.6mn for 1H24, up 98.8% YoY. UK and US operations chalked up EBITDA of RM138.7mn (+36.1%) and RM330.1mn (+16.1% YoY) respectively, as the stronger gaming volumes more than offset the rise in payroll costs (see GENM report).

• Resorts World Las Vegas’s (RWLV) 1H24 revenue expanded 7.4% to RM2.0bn while the adjusted EBITDA increase by 12.7% to RM422.7mn. The was mainly driven by higher volume of business from gaming and non-gaming operations. For this period, the hotel occupancy rate was stable at 89.3% with higher room rate of USD278 compared to USD261 a year ago.

Impact

• We cut GENT’s FY24-26 earnings lower by 23.3-25.0% after revising GENS’ earnings lower by 35-42%.

Outlook

• The meeting with Nevada Gaming Control Board pertaining to the allegation of allowing suspected and proven criminals to gamble is ongoing and management is unable to provide any guidance.

• We remain sanguine on the outlook for the gaming sector, Malaysia in particular, owing to the proliferation of foreign tourists. Having said that, the performance of casino stocks in Hong Kong, Singapore and Malaysia stock markets have been lacklustre, and we attribute this mainly to sluggish global economy.

Valuation

• We cut upgrade Genting SOP-valuation to RM4.76/share (from RM5.77) after revising GENS’ DCF valuations lower post earnings downgrade. Maintain Buy

Source: TA Research - 30 Aug 2024