Genting Bhd’s (GENT) 52.7%-owned subsidiary, Genting Singapore (GENS), reported an 85.5% increase in FY22 net profit to SGD340.1m, predominantly due to the return of visitors following the re-opening of international borders as well as removal of Covid-19 restrictions. The results came in below market expectations but above our estimates, accounting for 92% and 112% of full-year forecasts respectively. The discrepancy in our forecast was mainly due to higher-than-expected gaming revenue. We maintain our earnings estimates for now, pending the release of GENT’s FY22 results on 23rd February. A final DPS of 2 cents was declared. Maintain Outperform with an unchanged TP of RM5.80.

• Revenue (+62.1% YoY) lifted by the recovery of international travels, resulting in a 53% YoY jump in FY22 gaming revenue to SGD1,228.9m. Meanwhile, non-gaming revenue rose 90% YoY, mainly due to stronger contribution from hotel rooms (+34.9% YoY) and attractions (+198% YoY). We note that GENS recognised a net impairment on trade receivables of SGD29.7m compared with a reversal of SGD36.2m in FY21, mainly driven by the increase in credit extension as business volume picked up after the pandemic.

• FY22 net profit jumped 85.5% YoY. FY22 adjusted EBITDA rose 72.8% YoY following the sharp recovery in revenue. However, on a QoQ basis, net profit was down 11.7% despite a 4.4% increase in revenue. The overall profit margin was impacted by higher utility tariffs, casino tax and accelerated depreciation. Net margin fell from 26.1% in 3QFY22 to 22.1% in the current quarter.

• Outlook. Although the leisure & hospitality segment is unlikely to recover to pre-pandemic level this year due to a confluence of factors such as lower disposable income, higher airfares and cost pressures from rising utilities and labour cost, the absence of Covid-19 related restrictions should still encourage the return of international travellers over time. However, the group’s operations in Malaysia and Singapore could face competition from regional casino operators in Macau. Hence, we believe travellers from China are not likely to return to Resorts World Genting and Resorts World Sentosa in full swing by this year, but perhaps by early FY24F.

Source: PublicInvest Research - 21 Feb 2023