• Genting Berhad (GENT) reported a decent set of numbers for 2020, as coreLATAMI of RM524.5m is above our but below consensus forecasts
• Weakness in earnings is mainly due to lower-than-expected profit contribution from its Malaysian gaming operation, which was impacted by closure and interstate travel bans
• We are raising our 2021-22E earnings by 9.9-13.5% to input the latest performance of its subsidiaries. We also boost our TP to RM4.83, but maintain our HOLD call

GENS Is Doing Better, But GENM Is Struggling

Genting Singapore (GENS) was able to drive revenue growth by 77% qoq, as they were not impacted by any lockdowns given that the COVID-19 cases in Singapore remained under control. However, the gaming revenue remain flattish as it was only able to serve the local population as their borders remained shut to international tourism. Genting Malaysia (GENM) recorded a 537% qoq decline in revenue, as interstate travel bans were being implemented since early Nov. The interstate travel bans were reintroduce again in 1Q21, which will have a negative impact on GENM’s profitability. Although GENM will be opening its new theme park by mid-2021, the current SOP will likely cap its capacity.

Outlook for the Las Vegas Remains Challenging Too

Management guided that there is no change to its plan to open Resort World Las Vegas (RWLV) by summer 2021, and the operations will likely be managed by Genting Berhad team as they have indicated that they currently have no plans to contract it out to other operators. We remain sceptical on the profitability of the assets, as monthly revenue at the Las Vegas Strip continues to be below pre COVID-19 levels and is currently at USD321m (-43.8% yoy). Unless convention activities recover in the near term, overall visitation to Las Vegas will likely remain lacklustre.

Maintain HOLD With a Higher TP at RM4.43

We are raising our EPS for 2021-22E by 10-14% to input the current performance for its core subsidiaries. We are also raising our RNAV-based 12-month TP to RM4.83 (from RM4.20), as we revised higher the fair value of its gaming subsidiaries as we believe that investors might look past the earnings risk for 2021 and focus on the recovery in 2022 instead. Upside risk: 1) better-than-expected performance from its key subsidiaries, 2) higher-than-expected win factor; downside risks: 1) prolonged closure of borders for international tourism, 2) interstate travel ban in Malaysia extended beyond March.

Source: Affin Hwang Research - 26 Feb 2021