GenT reported 3Q21 core LATAMI of -RM296.9m which brought 9M21’s sum to -RM998.1m. We deem the result above our expectation as we expect GenT to be profitable in the next quarter. We revised our FY21-23 forecasts upwards to -RM582.2m/ RM1.5bn/ RM2.4bn from -RM844.8m/ RM1.4bn/ RM2.1bn after lifting its subsidiaries’ projections. Maintain BUY with unchanged TP of RM5.65 based on 50% discount to SOP. With GenM and GenS prospects improving, GenT is finally seeing the light at the end of the tunnel. We like GenT for its deep expertise and experience in managing the gaming and hospitality business and its well spread operations across different regions which help to mitigate regulatory and country risks.

Above ours but below consensus. GenT reported 3Q21 core LATAMI of -RM296.9m (2Q21: -RM382.8m; 3Q20: RM215.7m) which brought 9M21’s sum to -RM998.1m (9M20: -RM356.5m). While this missed consensus (-RM59.1m) expectations, the results were above ours (-RM844.8m) as we expect GenT to be profitable in the next quarter. 9M21 core LATAMI sum was arrived after adjusting for +RM241.7m of EIs, largely coming from (i) net impairment losses: +RM373.8m; and (ii) gain on disposal of a subsidiary: -RM64.3m.

Dividends. None. (3Q20: none). 9M21: none. (9M20: 6.5 sen).

QoQ. Revenue increased 19.3% mainly contributed by its UK (+1.2x) and US (+1.6x) leisure and hospitality and power (+8.1%) segments which more than offset the decline in its Malaysia leisure and hospitality segment (-93.2%). It’s UK and US operations continue to record improvements due to progressive easing of restrictions in the UK and positive contribution from RWLV in the US (c.66.5% of its US revenue), while its Malaysia operation was heavily impacted as it only had 1 operating day on 30 Sep 2021. Consequently, core LATAMI narrowed to -RM296.9m (from -RM382.8m) in line with the improvement in revenue.

YoY. Revenue increased 6.2% mainly contributed by its UK (+2.1x) and US (+14.6x) leisure and hospitality, power (+37.6%) and plantation (+14.3%) which more than offset the decline in its Malaysia leisure and hospitality segment (-98.6%). Despite the increase in revenue, the group recorded core LATAMI of -RM296.9m (vs. RM215.7m) mainly due to (i) higher depreciation (+34.1%) and net finance costs (+57.1%) following the opening of RWLV; and (ii) losses from JV and associates of -RM83.1m (vs. RM62.8m) due to the share of loss from its China power plant as a result of higher coal costs.

YTD. Revenue increased marginally by 2.1% contributed by its US leisure and hospitality (+3.9x), power (+8.6%), plantation (+16%) partially offset by its Malaysia leisure and hospitality segment (-77.9%). Despite the increase in revenue, the group’s core LATAMI widened to -RM998.1m (vs. -RM356.5m) largely due to the reasons mentioned in the YoY paragraph above.

Outlook. We expect a solid recovery in 4Q21 supported by the recovery from its gaming businesses in Malaysia and Singapore. GenM witnessed a strong return of local visitors to RWG since Malaysia lifted its interstate travel ban on 11 Oct, while Singapore is progressively easing its border restrictions for more countries, including Malaysia (from 29 Nov onwards) which will bode well for GenS as it relies heavily on international visitors (historically accounting for c.70-80% of visitations). Its US and UK operations continues to contribute positively towards its financials, while RWLV is enjoying excellent footfall to its casinos since its opening.

Forecast. We revised our FY21-23 forecasts upwards to -RM582.2m/ RM1.4bn/ RM2.1bn from -RM844.8m/ RM1.4bn/ RM2.1bn after lifting its subsidiaries’ projections.

Maintain BUY with an unchanged TP of RM5.65 based on 50% discount to SOP. With GenM and GenS prospects improving, GenT is finally seeing the light at the end of the tunnel. We like GenT for its deep expertise and experience in managing the gaming and hospitality business and its well spread operations across different regions which help to mitigate regulatory and country risks. Furthermore, GenT provides an exposure to RWLV which is very well received by visitors since its opening in June this year.

Source: Hong Leong Investment Bank Research - 26 Nov 2021