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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 25 Nov 2020, 10:24 AM

 

Genting Malaysia Berhad - Massive Losses Due To Lockdown

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Genting Malaysia (GENM) reported an RM900.4m net loss for 2QFY20, compared to a profit of RM416.5m in 2QFY19. This was largely due to temporary closure of all operations following a period of lockdown to contain the spreading of Covid-19. The group also incurred a redundancy cost amounting to RM71.5m during the quarter as it cut headcount to cushion the impact of revenue loss. For 1HFY20, core net loss stood at RM870.7m compared to our and consensus full-year net loss forecasts of RM392m and RM227m respectively. Although most of its operations have resumed, tighter standard operating procedures and the fear of a new wave re-emerging should restrict visitor arrival and business volume in the near term. We widen our FY20F net loss forecast to RM1,135m, though we expect losses to narrow in the coming quarters. For FY21-22F, our earnings forecasts are lowered slightly by 2-4%. Generally, we believe the worst may be over but earnings are not expected to revert to pre-Covid-19 level until FY22F. Our SOTP-based TP, which is based on FY21F, remains unchanged at RM2.00. Maintain Trading Sell on GENM. An interim dividend of 6.0sen per share was declared.

  • 2QFY20 revenue dropped 95.6% due to a decline in business volume for all its leisure & hospitality operations in the UK, US and Malaysia following the coronavirus pandemic which resulted in temporary closure of all businesses. Malaysia and UK operations suffered over 90% drop in revenue to RM82.2m and RM33.2m respectively while the US and Bahamas was also affected by a change in accounting estimate on revenue recognition of RM38.4m.
  • 2QFY20 adjusted LBITDA at RM486.2m due to lower revenue recorded by all major segments, though partly mitigated by lower payroll costs as a result of lower headcount. Additionally, the UK operations reported higher bad debt provision. The group’s share of losses in Empire Resorts amounted to RM78.6m, mainly attributable to financing cost and depreciation & amortisation.
  • Earnings unlikely to return to pre-Covid-19 level in FY21F. Although the UK and Malaysian operations have resumed following an extended period of lockdown, the US market remains temporarily closed due to the Covid-19 outbreak. Even if casinos and other tourist attractions are allowed to operate, we believe restrictions imposed with limitation to operating capacity in order to foster compliance with social distancing guidelines would affect the recovery of earnings. We opine that these restrictions will continue beyond 2020. In addition to the impact of economic fallout on consumer sentiment, we are of the view that operations may not fully return to normalcy even in FY2021F. Full recovery is more plausible in FY2022F.

Source: PublicInvest Research - 28 Aug 2020

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GENM 2.55 +0.07 (2.82%) 6,213,000 

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