Genting Bhd’s (GENT) 52.7%-owned subsidiary, Genting Singapore (GENS), reported a 73.8% decline in 4QFY21 net profit to SGD34.4m, mainly due to a decrease in visitorship following the emergence of the new Omicron variant. At the adjusted EBITDA level, results came in within expectations. Although the hospitality and tourism industry is not expected to stage a strong recovery sooner due to the new COVID-19 wave, we continue to believe that the worst is over for the Group. With Singapore recently resuming border reopening via the expansion of quarantine-free travel and increasing quotas under its vaccinated travel programme, we believe visitor arrivals at Resorts World Sentosa (RWS) should gradually improve. We reiterate our Outperform call and TP of RM5.70 for GENT. GENS proposed a final dividend of 1 cent per share (FY20: 1 cent per share).

• 4QFY21 revenue and net profit fell 17.0% and 73.8% respectively, mainly due to a decline in visitorship following the increase in Covid-19 community cases and the emergence of the Omicron variant. However, the impact was partly mitigated by the Singapore Government’s support measures, including the job support scheme and the SGD100 SingapoRediscovers vouchers. Meanwhile, net reversal of impairment on trade receivables has improved from SGD22.8m in FY20 to SGD36.2m in FY21.

• Outlook. Although businesses in RWS are not likely to rebound strongly given its dependence on large influx of foreign tourists, we believe the relaxation of COVID-19 related regulations and resumption of mutual vaccinated travel lanes should encourage the return of travellers to Singapore over time. As we believe the worst is behind us, we do not expect GENS to post any quarterly losses this year with domestic tourism to continue supporting operations at RWS. Meanwhile, the opening of Genting Malaysia’s outdoor theme park should improve visitorship at Resorts World Genting (RWG) though we do not expect any positive earnings contribution to the Group’s profit over the next 1-2 years.

Source: PublicInvest Research - 18 Feb 2022