GenT recorded 4Q20 core PATMI of RM37.1m (-82.8% QoQ, -92.8% YoY) and FY20 core LATMI of -RM319.4m (from RM2.3bn SPLY). The results were below expectations largely due to a slower than expected recovery in some of its key business segments. The gaming business remains challenging in the near-term despite its reopening in most places largely due to the limited operating capacity alongside fear of Covid-19. Despite the weaker than expected FY20 results, we raise our TP to RM4.54 (from RM4.29) as we impute earnings and TP upgrades from GenM, GenP and GenS. We believe that the prospects of GenT are improving but we view that the risk and reward is fairly balanced at this juncture.

Below expectations. GenT reported 4QFY20 core PATMI of RM37.1m (-82.8% QoQ, -92.8% YoY) bringing FY20 core LATMI to -RM319.4m (from RM2.3bn SPLY). The results were below expectations largely due to a slower-than-anticipated recovery in its UK operations. FY20 core PATMI sum has been arrived after excluding -RM704.7m of EIs, largely stemming from impairment losses.

Dividends. Declared special dividend of 8.5 sen/share (SPLY: 9.5 sen/share) bringing dividends declared for FY20 to 15.0 sen/share (SPLY: 16.0 sen/share). Final dividend for FY20 is expected to be announced in May 2021.

QoQ. Core PATMI decreased by 82.8% due to lower gaming revenue from its Malaysian operations as a result of stricter SOPs from escalating Covid-19 cases in 4Q20.

YoY. Core PATMI decreased by 92.8% on the back of weaker contributions from all segments (except Plantation) due to the ongoing pandemic coupled with limited operating capacity in its Gaming operations.

YTD. GenT recorded a core LATMI of -RM319.4m (from RM2,308.8m) largely due to the adverse impact of operation shutdowns during 2QFY20 and weaker overall footfall into its casinos due to Covid-19. The movement restrictions implemented globally has also limited operating capacity for most of its casinos.

Outlook. The gaming business remains challenging in the near-term despite its reopening in most places largely due to the limited operating capacity alongside fear of Covid-19. Nonetheless, we note that GenS has actually been receiving a good response from its local visitors and should continue to do so in FY21 with the outbreak being very much contained in the country. Also, we believe that the recent re-opening of RWG on the 16th of February and lower Covid-19 cases of late in Malaysia is also a good sign of recovery. For GenP, higher CPO prices are expected to improve its earnings further in FY21. We remain hopeful on the long-term prospects which will be supported by the opening of RWLV and GenM’s OTP in 2021.

Forecast. We increase our earnings by 1.3/1.0% for FY21-22f to factor in our adjustments of profit from its subsidiaries.

Maintain HOLD with a higher TP of RM4.54 (from RM4.29) with an unchanged discount at 60% to our SOP-derived valuation of RM11.13 after updating the TP changes for its subsidiaries. Since share price has risen 55% since early Nov, we believe the risk and reward are fairly balanced at this juncture.

Source: Hong Leong Investment Bank Research - 26 Feb 2021