PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 5 Aug 2021, 10:17 AM


Genting Berhad - Lower Revenue For All Segments

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Genting Bhd (GENT) reported a net loss of RM331.7m for 1QFY21, versus a loss of RM132.1m for 1QFY20 as all divisions recorded lower revenue with Leisure & Hospitality being the main drag. The results came in below expectations as we and the street were forecasting a net profit for FY21F. Business volume came in lower-than-expected largely due to the impact of lockdown and operational restrictions on the hospitality and tourism industry. We cut our FY21-22F earnings forecasts by 20-35%, factoring in a slower pace of recovery, which is dampened by the recent resurgence of virus cases in several of its key markets. However, we continue to believe that the worst is over for the group as a complete lockdown of domestic and global economies is unlikely to recur given the vaccination programme rollout. We roll forward our valuation to FY22F and consequently, our SOTP-based TP is revised from RM5.18 to RM5.40. We reiterate our Outperform call.

  • 1QFY21 revenue was down 45% YoY. Operational performance of the hospitality and tourism industry continued to be affected by the impact of Covid-19 pandemic. Given that travel restrictions and partial lockdowns were still in place, the group reported lower business volume and visitation rate in Malaysia, Singapore, the UK and the US. Singapore, its largest revenue contributor, saw a 31% decline while Malaysia (second-largest contributor) posted a 76% drop in revenue. Despite a rally in CPO prices, plantation segment registered a 6% decline in revenue due to lower downstream contribution.
  • 1QFY21 adjusted EBITDA fell 55% YoY mainly dragged by lower revenue. Malaysia posted a loss of RM88.4m compared to a profit of RM436.2m in 1QFY20. Singapore only recorded a 15% drop in EBITDA due to resumption of business as well as Resorts World Sentosa’s effort in promoting domestic tourism with the introduction of creative events.
  • Outlook. We believe borders are likely to remain shut in the near term until we are closer to achieving herd immunity, perhaps in early 2022. This suggests that the operations of its leisure & hospitality segment should continue to run below optimal rate in FY21F. Meanwhile, the USD4.3bn Genting Las Vegas (GLV) is scheduled for opening on 24 June 2021. We generally believe the new integrated resort will remain in net loss in the initial years of operations given the badly-affected tourism and hospitality sector, following the onslaught of a global pandemic. Post-Covid-19 era is likely to see a slow build-up and coupled with a potential increase in depreciation charges, we do not expect GLV to contribute positively to the group’s bottomline over the next 2-3 years.

Source: PublicInvest Research - 27 May 2021

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