Genting Malaysia (GENM) reported a net loss of RM289.2m for 3QFY21 compared to a net loss of RM704.7m in 3QFY20, mainly due to lower tax cost for the current quarter. Adjusted EBITDA was down 82.7% YoY as its Malaysian operations were severely affected by the nationwide lockdown, which resulted in temporary closure of Resorts World Genting (RWG) from 1 June until 29 September. Cumulative 9MFY21 core net loss stood at RM1.15bn versus our and consensus full-year forecasts of RM1.2bn. We maintain our FY21F forecast as we expect better performance in 4QFY21 due to the resumption of operations and the removal of interstate travels restrictions. However, we cut our earnings forecast for FY22F by 6% to factor in the impact of Cukai Makmur. Our SOTP valuation remains unchanged at it is based on 2-year average forward earnings. Maintain Neutral on GENM.

• 3QFY21 revenue slumped 41.7% YoY. Malaysian operations were severely affected by the nationwide lockdown as RWG was shut for almost the entire quarter. Operations only resumed on 30 September. As a result, revenue from Malaysia fell 98% to RM17.7m. However, both the UK and US delivered stronger contribution. In the US, full lifting of the Covid-19 restrictions since June has helped to boost revenue from RM70m in 3QFY20 to RM364.2m. Meanwhile, revenue from the UK & Egypt rose 209% to RM406m due to re-opening of land-based casinos and progressive easing of Covid-19 restrictions.

• Core net loss due to setback suffered by Malaysian operations. Malaysia posted a LBITDA of RM164.8m while operations in the UK and US were profitable during the quarter. The group posted an EBITDA of only RM53.7m in 3QFY21, compared to RM310.7m in 3QFY20. Empire Resorts’ net loss has narrowed from RM62m to RM30.9m in 3QFY21. The group’s core net loss was lower at RM303m (3QFY20: RM485m) mainly due to lower tax cost as a result of utilisation of available tax losses of its subsidiaries.
• Outlook. We expect the group to turn profitable in 1QFY22 due to the opening of Genting SkyWorlds that would attract local tourists during the festive season. After multiple delays, the wait is almost over as the USD800m theme park is finally scheduled to open its doors to the public soon. We view this positively as this should mark a gradual return to normalcy after numerous rounds of shutdown of its operations caused by the pandemic. Although we are forecasting a profitable FY22F after two years of setback, we expect earnings to recover to pre-pandemic level only in FY23F. This is because we believe RWG would continue to operate below its optimal level in FY22F as strict SOPs should still be in place.

Source: PublicInvest Research - 26 Nov 2021