GenM reported 9MFY20 core LATMI to -RM1,052.1m (from RM1,094.7m YoY) which was below our and consensus full year forecasts (of -RM709.6m and - RM824m) largely due to a slower than anticipated recovery in its UK and US operations. Near term operations will continue to be challenging given the ongoing interstate travel ban and concerns over the Covid-19 outbreak. We do not discount the possibility of interstate travel bans extending into 2021 given the risks of Covid-19 resurgences. We widen our FY20 forecasted losses to - RM1,435.4m (from -RM709.6m) and maintain HOLD with an unchanged TP of RM2.43 based on an unchanged 10% holding discount.

Below expectations. GenM reported 3QFY20 core LATMI of -RM88.7m (-90.6% QoQ, RM357.8m YoY), bringing 9MFY20 core LATMI to -RM1,052.1m (from RM1,094.7m SPLY). We deem this below our and consensus full year forecasts (of - RM709.6m and -RM824m) largely due to a slower-than-anticipated recovery in its UK and US operations. 9MFY20 core PATMI sum has been arrived after excluding - RM971m of EIs, which mainly includes -RM541m of impairments in its overseas operations, -RM178m deferred tax charge, -RM130m redundancy costs (rightsizing of workforce), -RM57m of pre-operating expenses, and -RM46m of one-off refinancing costs.

Dividends. None declared.

QoQ. Core LATMI narrowed to -RM88.7m (from -RM793.2m) largely due to the lack of operations in 2QFY20 coupled with unavoidable operating costs and higher interest expense.

YoY/YTD. GenM recorded a core LATMI of -RM88.7m/-RM1,052.1m (from RM357.8m/RM1094.7m) on the back of the ongoing pandemic coupled with limited operating capacity. 1HFY20 was also hit by the closure of operations during the MCO.

Outlook. Near term operations will continue to be challenging given the ongoing interstate travel ban and concerns over the Covid-19 outbreak. On the local front, visitor arrivals currently record 15k/day from the peak of 60k/day largely due to the interstate travel ban. We do not discount the possibility of interstate travel bans extending into 2021 given the risks of Covid-19 resurgences.

Forecast. We widen our FY20 forecasted losses to -RM1,435.4m (from -RM709.6m) as we impute a slower recovery in gaming volume alongside lower margins to reflect the impact of the outbreak.

Maintain HOLD with an unchanged TP of RM2.43 based on an unchanged 10% holding discount. We expect share price to potentially remain subdued in the nearterm given impact of Covid-19 towards its overall operations. Our hold call and TP is already premised upon FY21 numbers (pegged to -1SD below the 10-year mean).

Source: Hong Leong Investment Bank Research - 27 Nov 2020