GenM reported 3Q21 core LATAMI of -RM282.4m which brought 9M21’s sum to -RM1.01bn, which we deem above our/consensus expectations as we expect GenM to return to profitability in 4Q21. We increased our FY21/FY22 forecasts to -RM934.3m/RM1,027m from -RM1,244m/RM1,011m while leaving our FY23 forecast largely unchanged to account for the reopening and strong recovery in RWG. Maintain BUY with a slightly higher SOP based TP of RM3.61 (from RM3.59) as we updated our earnings forecasts. We continue to like GenM as we believe its prospects are improving with the return of crowd to RWG. With the addition of SkyWorlds theme park, RWG will be able to attract a bigger and more diverse crowd from both gaming and non-gaming visitors.

Above expectations. GenM reported 3Q21 core LATAMI of -RM282.4m (2Q21: -RM372.8m; 3Q20: -RM88.7m) which brought 9M21’s sum to -RM1.01bn (9M20: -RM1.05bn). We deem this above our/consensus full year loss forecasts of -RM1.24bn/-RM1.2bn as we expect GenM to return to profitability in 4Q21. 9M21 core LATAMI sum was arrived after adjusting for +RM1.5m of EIs, mainly comprising of a gain on disposal on a subsidiary amounting to -RM64.3m and +RM31.1m of impairments.

Dividends. None (3Q20: none). 9M21: none (9M20: 6 sen).

QoQ. Revenue was flat at +1% dragged by its Malaysia operations (-92.7%) due to the closure of RWG, while mitigated by its UK operations (+119.1%) due to the progressive easing of restrictions in the region. Core LATAMI narrowed to -RM282.4m (from -RM372.8m) due mainly to (i) better EBITDA in UK of RM102.1m (vs. RM14.3m) as better operational efficiency was achieved from higher visitations; and (ii) narrower loss from Empire of -RM30.9m (vs. -RM50.6m).

YoY. Revenue declined by -41.7% dragged down by its Malaysia operations (-98.5%) while partially offset by its UK (+2.1x) and US (+4.2x) operations. Malaysia segment suffered as it only had 1 operating day during the quarter when it resumed operations on 30 Sep. US and UK improved due to low base SPLY as RWNYC only resumed operations since 9 Sep 2020; while UK resumed operations since mid-Aug 2020. Core LATAMI widened but by a smaller quantum relative to revenue to -RM282.4m (from -RM88.7m) due to (i) lower operating expenses and reduction in payroll cost from lower headcount in RWG; and (ii) narrower loss from Empire of -RM30.9m (vs. -RM62m).

YTD. Revenue declined by -35% dragged down by its Malaysia operations (-77.7%) while partially offset by its US operations (+1.7x). Malaysia segment suffered as it was closed c.5 months (vs. c.3 months SPLY), while US segment improved due to longer operating period compared to SPLY as well as a strong rebound in demand in RWNYC as restrictions eased during the period. Despite the decline in revenue, core LATAMI only widened slightly to -RM1,119.4m (from -RM1,052m) due to (i) lower operating expenses and reduction in payroll cost from lower headcount in RWG; and (ii) narrower loss from Empire of -RM126.9m (vs. -RM240.7m).

Outlook. Since the lifting of inter-state travel ban from 11 Oct in Malaysia, RWG has witnessed a strong return of local visitors due to pent-up traveling demand and also due to the restricted traveling abroad. As per our checking, 5 out of 7 RWG hotels are fully booked until year end, while the remaining 2 have limited rooms available. We expect the strong footfall to RWG to sustain in the near term supported by (i) the opening of Genting SkyWorlds theme park targeted at Dec-2021 to coincide with the school holidays; and (ii) the upcoming CNY season which should attract more crowds especially to its gaming segment.

Forecast. We narrow our FY21/FY22 forecasts to -RM934.3m/RM1,027m from -RM1,244m/RM1,011m while leaving our FY23 forecast largely unchanged to account for the reopening and strong recovery in RWG.

Maintain BUY with a slightly higher SOP based TP of RM3.61 (from RM3.59) as we updated our earnings forecasts. We continue to like GenM as we believe its prospects are improving with the return of crowd to RWG. With the addition of SkyWorlds theme park, RWG will be able to attract a bigger and more diverse crowd from both gaming and non-gaming visitors. Furthermore, we expect its UK and US operations to continue to record positive contributions, as seen in 3Q21.

Source: Hong Leong Investment Bank Research - 26 Nov 2021