GenM reported 4Q22 core PATAMI of RM83.2m, bringing FY22’s sum to RM149.5m (FY21: -RM855.1m). The results were below ours and consensus expectations due to weaker-than-expected contribution from UK gaming and higher-than-expected losses from associate Empire. Maintain forecasts and BUY call with a higher TP of RM3.59 (from RM3.44) based on SOP valuation as we roll over our valuation base year to FY23 (from mid-FY23). We like GenM as we believe RWG is one of the prime beneficiaries of borders reopening and recovery in tourism activities. We believe that visitations to RWG has the potential to scale beyond pre-pandemic level given the capacity increase and the more diverse crowd it attracts due to the addition of its theme park.

Below expectations. GenM reported 4Q22 core PATAMI of RM83.2m (-9.9% QoQ; - 70.2% YoY), bringing FY22’s sum to RM149.5m (FY21: -RM855.1m). The results were below ours (85.7%) and consensus (37%) expectations due to weaker-than-expected contribution from UK gaming and higher-than-expected losses from associate Empire.

EIs. FY22’s core PATAMI was arrived at after excluding net EIs of -RM669.5m comprising of (i) PPE write-off (-RM2.6m); (ii) impairment losses (-RM412.2m); (iii) forex losses (-RM260.9m); (iv) subsidiary disposal gain (+RM5.8m); and (v) PPE disposal gain (+RM453k). The impairment losses were mainly for the assets of Resorts World Bimini and other receivables in the US. The forex loss was mainly from the valuation of the group’s USD bond as Ringgit depreciated against the USD.

Dividends. 9 sen, ex-date: 20 Mar 2023 (4Q21: 9 sen). FY22: 15 sen (FY21: 9 sen).

QoQ. Core PATAMI declined by -9.9% mainly due to softer performance from UK gaming segment and its associate Empire. UK gaming adjusted EBITDA declined by - 18.4% due to lower spending by consumers impacted by inflationary pressure and weaker consumer confidence. Its associate recorded a wider loss of -RM55.4m (vs. - RM6.6m in 3Q22).

YoY. Core PATAMI declined by -70.2% YoY due to (i) weaker contribution from UK gaming segment for the same reasons as QoQ above; and (ii) higher depreciation and finance cost post-opening of theme park in RWG.

YTD. Core PATAMI improved to RM149.5m (from -RM855.1m SPLY) mainly due to improvement from RWG with more operating days and recovery in foreign visitations.

Outlook. Despite RWG hilltop visitors declined to 5.3m in 4Q22 (from 6.1m in 3Q22), adjusted EBITDA for RWG improved by +5% QoQ, likely due to higher mix of foreign visitors (30% visitors are of foreign visitors). 4Q22 lower visitations to RWG was impacted by the World Cup event and the nearby Batang Kali landslide. Management guided that visitations improved during the CNY period. With the recovery in foreign visitations and China’s reopening, we expect RWG to see improvement in FY23. In addition, Empire recently opened its new Resorts World Hudson Valley (RWHV), the newest casino in New York State on 28 Dec 2022 which should contribute positively to the group’s performance moving forward.

Forecast. Unchanged.

Maintain BUY with a higher TP of RM3.59 (from RM3.44) based on SOP valuation as we roll over our valuation base year to FY23 (from mid-FY23). We like GenM as we believe RWG is one of the prime beneficiaries of borders reopening and recovery in tourism activities. We believe that visitations to RWG has the potential to scale beyond pre-pandemic level given the capacity increase and the more diverse crowd it attracts due to the addition of its theme park.

Source: Hong Leong Investment Bank Research - 24 Feb 2023