GenT reported 4QFY19 core PATMI of RM2,308.8m (-11.7% QoQ, -24% YoY), which brings the FY19 sum to RM2,308.8m (-15.9% YoY). YTD core PATMI fell - 15.9% largely due to higher depreciation, lower net interest, and a higher payout for minority interest. We tweak our FY20/21 earnings estimates by -18%/-1.1%, respectively as we impute the earnings changes from GenP, GenM and GenS. Maintain BUY with a lower TP of RM6.17 after imputing the revisions from GenP, GenM, and GenS. We remain optimistic on the long-term prospects of the company as the valuation of the subsidiaries will be lifted upon signs of the outbreak being contained.

Within expectations. GenT reported 4QFY19 core PATMI of RM516m (-11.7% QoQ, -24% YoY), which brings the FY19 sum to RM2,308.8m (-15.9% YoY). This formed 98.5% and 100.8% of our and consensus full year forecasts, respectively. FY19 core PATMI sum has been arrived after excluding -RM313m of EIs.

Dividends. Declared special dividend of 9.5 sen per share (going ex on 13 Mar) and final dividend of 6 sen per share, bringing FY19 to 22 sen (FY18: 19.5 sen) per share.

QoQ/YoY. Core EBITDA dropped -5.2%/-8.3% to RM1886.5m mainly due to the casino duty rate hike in Malaysia, lower contributions from the UK and Power segments but was partially offset by improved Plantation contributions. Subsequently, core PATMI dropped -11.7%/24% to RM516m in tandem and was further hit by a lower share of results from JV and Associates.

YTD. Despite FY19 recording a relatively flat core EBITDA of RM7,782.3m (-3.9%), core PATMI fell -15.9% to RM2,308.8m. This was largely due to higher depreciation expenses (subsidiary GenS had shortened useful life of certain assets in preparation for RWS2.0), lower net interest, and a higher payout for minority interest.

Share price taken a hit. The ongoing Covid-19 outbreak has been impacting the gaming industry in all regions, which led to investors fleeing gaming related stocks. We gather that GenM had experienced c.17% drop (YoY) in visitor arrivals for the month of Feb while GenS has also cautioned us on the decrease in volumes. Nonetheless, we note that GenT experienced the largest sell-down (c.16%) amongst the other counters since the outbreak escalated during the Chinese New Year and is now at a 10-year low.

Forecast. We tweak our FY20/21 earnings estimates by -18%/-1.1%, respectively as we impute the earnings changes from GenP, GenM and GenS.

Maintain BUY, TP: RM6.17 (from RM6.73) derived from a 50% holding discount to our SOP-derived TP of RM12.33. We maintain our BUY rating albeit with a lower TP after imputing the revisions from GenP (RM12.41 from RM11.80), GenM (RM3.13 from RM3.64), and GenS (SGD0.96 from SGD1.14). Despite ongoing concerns of the outbreak, our TP has taken into account the uncertainty of the outbreak towards GenT’s subsidiaries with an earnings cut and/or a higher discount rate. We remain optimistic on the long-term prospects of the company as the valuation of the subsidiaries will be lifted upon signs of the outbreak being contained.

Source: Hong Leong Investment Bank Research - 28 Feb 2020