GenT recorded 2Q21 core LATMI of -RM383m (QoQ: -RM318m, YoY: -RM786), bringing 1H21 core loss to -RM701m (YoY: -RM572m). The results were below our (FY21f: RM29.7m) and consensus’ (FY21f: RM277m) expectations largely due to weaker than expected results from GenM and GenS. Nevertheless, we remain positive on the vaccination rates in Malaysia as the economy is already opening up to fully vaccinated individuals. We also expect RWLV to contribute positively to GenT’s financials in 2H21 as footfall into its casino has been very encouraging since it commenced operations. Following changes to the TPs of its subsidiaries, our TP is lowered slightly from RM5.75 to RM5.65. We believe that investors will eventually start to look ahead its poor results as its UK and US operations have already recorded strong improvements in 2Q21.

Below expectations. GenT reported 2Q21 core LATMI of -RM383m (QoQ: -RM318m, YoY: -RM786m), bringing 1H21 core LATMI to -RM701m (YoY: -RM572m). The results were below our (RM29.7m) and consensus’ (RM277m) expectations largely due to weaker-than-expected results from its Malaysian operations due to Covid-19. 1H21 core LATMI sum has been arrived after adjusting for -RM194m of EIs to the reported net loss figure, largely coming from (i) net impairment losses: -RM264.3m and (ii) gain on disposal of PPE: +RM64.3m.

Dividends. None declared, vs 6.5 sen/share declared SPLY.

QoQ. GenT’s loss of -RM383m (from a core loss of -RM318m) was primarily due to the implementation of MCO3.0/ Phase 1 in Malaysia, which resulted in the closure of RWG since 25 May 2021, mitigated by improvements in its UK and US businesses.

YoY. GenT’s narrowing of core loss to -RM383 (from -RM722m) was also attributable to higher operating days of RWG as it was closed for the most part of 2Q20 and better contributions from its overseas operations.

YTD. Core loss widened to -RM701m (from -RM572m) due to lower operating days for RWG as it was opened for the most part of 1Q20. Nevertheless, the YTD losses were partially mitigated by stronger overseas contribution.

Outlook. The gaming business in Malaysia and Singapore will continue to plague GenT as Covid-19 cases have been escalating at an alarming pace in South East Asia of late and we believe that it will remain challenging in the near-term. On a more positive note, vaccination rates in Malaysia are increasing rapidly and the economy is already opening up to fully vaccinated individuals. Its US and UK operations have also almost resumed its full operations and have started to contribute more to its financials, while RWLV is expected to contribute positively towards its financials in 2H21 as the footfall into its casinos have been excellent. We remain hopeful on the long-term prospects of GenT as we expect it to record an exponential recovery in FY22.

Forecast. We revised our net profit forecast of RM29.7m to a core loss of -RM845m for FY21 to factor in the weaker than expected contributions from its Malaysian and Singapore operations while maintaining our core profit forecast for FY22-23f as we believe that GenT will still record an sharp recovery in FY22, supported by RWLV.

Maintain BUY with slightly lower TP of RM5.65 (from RM5.75) based on 50% discount to SOP after we updated changes in TPs for its subsidiaries. We believe that investors would look beyond FY21’s results as GenT is expected to record an exponential recovery in FY22. Its contribution from its US and UK business is also expected to partially mitigate its weak results from GenM and GenS in FY21.

Source: Hong Leong Investment Bank Research - 30 Aug 2021