Genting Malaysia Berhad - Higher Contribution From Malaysia

Date: 30/08/2018

Source  :  PUBLIC BANK
Stock  :  GENM       Price Target  :  5.40      |      Price Call  :  HOLD
        Last Price  :  3.22      |      Upside/Downside  :  +2.18 (67.70%)

Genting Malaysia (GENM) posted a 104% increase in 2QFY18 net profit to RM395.7m. Stripping out impairment losses, forex impact and other non-operating items, core net profit stood at RM402.5m, +39.3% YoY. This was mainly attributable to higher revenue from leisure & hospitality business in Malaysia on improved hold percentage and lower cost relating to the premium players segment. For 1HFY18, the results accounted for 55% and 50% of our and consensus full-year estimates respectively. We tweak our FY18-20F earnings forecast by +5% to factor in lower operating cost for the Malaysian operations. We have also rolled forward our SOTP valuation to FY19F, resulting in an upward revision in our TP from RM5.05 to RM5.40. We maintain our Neutral rating on GENM. An interim dividend of 6.0sen per share was declared, higher than last year’s corresponding period of 4.0sen per share.

  • 2QFY18 revenue increased by 5.7% YoY to RM2,422.1m. Malaysia’s hospitality & leisure segment remained the largest contributor, accounting for 66% of group’s revenue in 2QFY18. This segment registered a growth of 10% due to higher hold percentage in the mid to premium players segments. The opening of new attractions under the Genting Integrated Tourism Plan (GITP) has also contributed to the increase in revenue. The UK & Egypt segment also delivered a 6% growth on higher contribution from Crockfords Cairo but this was offset by lower revenue from the US & Bahamas due to unfavourable foreign exchange movement of the USD against the Ringgit.
  • 2QFY18 adjusted EBITDA jumped 31% YoY to RM701.8m. This was largely driven by Malaysia’s hospitality & leisure segment which saw its adjusted EBITDA improving by 24% on higher revenue and lower operating cost relating to the premium players segment. However, this was partly offset by an increase in operating cost incurred for the new facilities under GITP. Meanwhile, both the UK & Egypt and US & Bahamas operations reported lower profit due to higher bad debt written off and lower revenue.
  • Outlook. In Malaysia, on-going development and gradual completion of the GITP remains the primary focus with the highly-anticipated 20th Century Fox theme park to be ready by 4QFY18. In the UK, domestic operating environment remains challenging and the group would be focusing on non premium gaming segment and improve overall efficiency while in the US, it will continue to intensify direct marketing initiatives to drive visitation and business volume.

Source: PublicInvest Research - 30 Aug 2018

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