• 9M24 results below expectations at 69% and 67% of our and street’s estimates

• Cut 2024–26E earnings by 10–19%

• Maintain BUY with lower SOP-derived target price of RM4.75

Below expectations, dragged by GenS

Stripping out RM85m impairment losses and RM13m fair value loss, 9M24 core net profit of RM1.2bn (+29% YoY) came in at 69% and 67% of our and the street’s full-year forecasts. The main shortfall was attributed to the weaker-than-expected GENS’ results, with gaming volumes impacted by slower foreign visitations recovery and heightened competition, leading to 7ppts decline in GENS’ EBITDA margin, while GENM’s EBITDA margin also declined by 1ppt. This was partly offset by stronger EBITDA from the other segments.

Weaker 3Q24

3Q24 revenue and core PATAMI declined 11% and 50% YoY, respectively, underpinned by weaker-than expected GENS contribution. We note that RWG continues to see strong hilltop visitation in 3Q24 (+10% YoY), with increased tourists from Singapore (+3%) and China (>100%) compensating for weaker local visitation (-5%). In the US, Resorts World Las Vegas posted revenue of US$177m and EBITDA of US$16.4m (2Q24: US$218m/$50m). Management attributed the weaker RWLV performance to adverse weather conditions affecting visitations. 3Q24 group EBITDA declined 15% YoY, as EBITDA margins from the leisure and hospitality segment declined 11ppt YoY.

Maintain BUY; lower SOP derived RM4.75 TP

We cut our 2024–26E earnings estimates by 10–19%, reflecting a weaker-than-expected GENS performance, weaker forex and updating GENM figures. Additionally, we raised the group holding discount to 65% (from 60%) to account for the potential exclusion from the upcoming FBMKLCI review. As a result, our SOP-derived TP is lowered to RM4.75 (from RM5.90) while maintaining our BUY call. GENT trades at 5.2x 2025E EV/EBITDA (-1.5SD from its 10-year mean), which we find attractive. The key earnings growth driver continues to be its gaming and leisure operations, with potential catalyst from successful commercialization and listing of TauRx. Key risks to our BUY call includes lower-than-expected win rates, rising operational cost, and a decline in both gaming and non-gaming revenue.

Source: Philip Capital Research - 29 Nov 2024