Genting Bhd (GENT) posted a net profit of RM98m for 1QFY23, compared to a loss of RM199.7m in 1QFY22. This was mainly due to a recovery of the leisure and hospitality segment following the removal of travel restrictions. However, the results were below expectations as the pace of recovery remains slow given the constraints in international travel, which we attribute to weaker consumer spending due to inflationary pressures. We cut our FY23-25F earnings forecasts by an average of 13%, after factoring in weaker earnings from Malaysia and Singapore as well as the plantation segment. Our SOTP-based TP is reduced to RM5.50. We still like GENT as we believe business operations would continue to recover from Covid-19 related impacts while global economic conditions are expected to gradually improve moving into 2024. Maintain Outperform.

• 1QFY23 revenue rose 38% YoY. Leisure and hospitality segment posted a 43% growth in revenue, mainly driven by higher contribution from Malaysia, Singapore and the US & Bahamas. Contribution from Resorts World Las Vegas (RWLV) was included in the revenue of the US & Bahamas segment. Since its opening, RWLV’s improved performance was driven by growth in the convention business, casino and hotel divisions. Meanwhile, plantation revenue rose 10% YoY mainly due to higher downstream contribution.

• 1QFY23 net profit. Following many quarters of losses since the onslaught of the Covid-19 pandemic, GENT posted a profit in the current quarter as business operations continued to recover. However, the pace of recovery was slow, mainly restricted by the lack of foreign tourists due to airline capacity constraints that resulted in elevated airfares, thereby capping incoming mass leisure tourist traffic. Plantation segment delivered a lower profit (-49% YoY) due to weaker upstream earnings on lower palm product prices.

• Outlook. The reopening of China’s international borders should benefit Resorts World Sentosa with the return of Chinese tourists, which used to account for almost a third of its gross gaming revenue prior to the pandemic. Likewise, Resorts World Genting should also see a gradual recovery in visitorship. However, in view of weaker consumer sentiment due to monetary policy tightening that could potentially lead to a global recession, we believe visitorship is not likely to revert to pre-pandemic levels in FY23F.

Source: PublicInvest Research - 26 May 2023