Genting Bhd (GENT) posted a net profit of RM160.5m for 2QFY23, compared to a net loss of RM59.5m in 2QFY22. This was due to a strong recovery of the leisure and hospitality segment following the removal of travel restrictions, particularly from Genting Singapore (GENS). For 1HFY23, core earnings came in within expectations, accounting for 47% of our and consensus full-year estimates. We still like GENT as we believe business operations would continue to recover while global economic conditions are expected to gradually improve moving into 2024. Maintain Outperform. Our SOTP-based TP is reduced slightly to RM5.40 due to a downward revision in Genting Malaysia’s earnings forecasts, which results in a 2-5% cut in GENT’s FY23-25F earnings. An interim dividend of 6 sen per share was declared (2QFY22: 7 sen per share).

• 2QFY23 revenue rose 17% YoY. Leisure and hospitality segment posted a 31% growth in revenue, mainly driven by higher contribution from Malaysia, Singapore and the US & Bahamas. Singapore posted the strongest jump, +83% YoY, manly attributed to rebound in non-gaming revenue and recovery in regional gaming business. However, this was partly offset by lower plantation revenue (-23% YoY) as a result of lower palm product prices. Oil and gas revenue was also lower, down 26% YoY on lower crude oil prices.

• 2QFY23 net profit of RM160.6m. GENT delivered a second consecutive quarter of net profit, primarily driven by stronger earnings growth from Singapore of 91% YoY. Singapore contributed to 47% of group’s adjusted EBITDA, followed by Malaysia and the US & Bahamas of 34% and 16% respectively. Resorts World Las Vegas continues to ramp up its operations with hotel occupancy and average daily rate at 90.2% and USD243 respectively, compared with 89.9% and USD239 in 2QFY22. Meanwhile, plantation earnings fell 54% YoY due to lower upstream profit as well as losses at downstream manufacturing.

• Outlook. The reopening of international borders has benefitted Resorts World Sentosa with the return of foreign tourists. Although the recovery has been slow since reopening, sharp improvement has been observed in recent months with Singapore’s Jan-May 2023 total air passenger arrivals recovering to 82% of 2019 pre-Covid level. Likewise, Resorts World Genting should also see a gradual recovery in visitorship in 2H23.

Source: PublicInvest Research - 25 Aug 2023