Visitation Growth Continues

Genting Malaysia (GENM) reported a relative good set of results as 1QFY18 core PATAMI of RM372.2m (+7.2% yoy) came in within both consensus and our expectation (22.5% of our and street’s respective forecast). Bulk of the earnings growth was derived from the Malaysian operations, driven by a +6% yoy visitation growth. No change to our EPS forecast and TP of RM6.00. Maintain BUY.

Continue to Benefit From GITP

The Malaysian operations continue to enjoy the benefit from its GITP program, as there was an increase in both the mass and premium mass players, on the back of the overall +7% yoy increase in overall visitation. Adjusted EBITDA is up 22% yoy to RM534m for the quarter, which we believe still has room to grow, as visitation growth is expected to continue with the indoor theme park and outdoor theme park are still slated for opening before end of the year. There will also be some margin uplift in the 3Q, benefiting from the “zero” GST, which is positive for GENM.

Decline in International Operation Contribution

EBITDA contribution from its international operation is down 20% yoy, due to the weakness in its UK operation, as revenue is down by 11% yoy. The decline was due to weakness for both the high end and mass market, contracting by 34% and 10% yoy respectively. The US operation has continued to show positive improvement, as EBITDA is higher by 57% yoy, helped by the narrowing losses from its Bimini operation. Although the US operation is likely to continue growing, the weakness in its UK operation could still continue, in our view.

Maintain BUY With An Unchanged TP of RM 6.00

We make no changes to our SOTP-based 12-month TP of RM6.00 while maintaining our BUY call on the stock. We believe that as we move closer to end of the year, the clarity on the opening date of the theme park will be the key catalyst for the stock, as we are expecting a strong uplift in visitation growth post its opening.

Source: Affin Hwang Research - 25 May 2018