While FY21 core loss of RM582.4m came below expectation, we reiterate that GENTING is a key beneficiary of economy recovery play as a swift rebound is in store for RWG and RWS once the borders reopen. In addition, GENP will continue to excel given the elevated CPO prices. In all, we have trimmed FY22 earnings forecast by 4% to reflect the weak 4QFY21. Maintain OUTPERFORM with a revised lower target price of RM6.12 from RM6.38.

4QFY21 missed expectation. Although 4QFY21 core loss narrowed to RM116.3m, which brought FY21 core loss to RM582.4m, the results still fell short of expectations against our net loss assumption of RM23.0m and consensus net loss forecast of RM244.4m. This was largely due to: (i) disappointing GENS’ (Not Rated) RWs earnings; (ii) higher share of losses of associate income largely from the Meizhou Wan power plant on rising coal costs. Meanwhile, it declared the first NDPS in FY21, with a 9.0 sen special NDPS (ex-date: 14 Mar; payment date: 08 Apr) which was lower than our forecast of 15.0 sen and against a total of 15.0 sen NDPS paid in FY20.

Weak GENS numbers. 4QFY21 core loss reduced to RM116.3m from RM355.2m in 3QFY21, thanks to the impressive results of RWG, which turned around, and GENP posted 58% jump in net profit as CPO prices soared while the UK and North America units continued to chalk up solid numbers. Meanwhile, the losses were further pressured by higher associate loss due to the abovementioned Meizhou Wan as well as weaker GENS earnings.

Better GENM and GENP’s results capped downside. YoY, although both 4QFY21 and FY21 registered core losses as opposed to core profits last year, GENM saw improving results from all its geographical business units while GENP benefited from rising CPO prices as mentioned above. CPO prices had risen 55% and 37% in 4QFY21 and FY21, while PK prices jumped 97% and 71%, respectively.

A better FY22. With more mutual VLTs opening up border between countries, both GENM and GENS should see higher visitor arrivals to boost earnings. Meanwhile, GENP is also set to benefit from the still high CPO prices. In view of weak 4QFY21, we are cutting FY22 earnings estimate by 4% to RM1.51b while we introduce FY23 new forecasts with earnings expected to grow 25%. We also forecast NDPS of 15.0 sen for both FY22-FY23.

Keep OUTPERFORM for a recovery play. GENTING is a good pick for economy recovery play as its business should recover quickly once cross-border restrictions are lifted especially for GENS. New casino RWLV could be a wild card judging from initial data. Post 4QFY21 results revision, our new target price is lowered to RM6.12 from RM6.38 based on unchanged +1SD to 5-year mean at 41% discount to SoP valuation.

Risk to our call is a prolonged COVID-19 pandemic continuing to restrict travelling and hence affecting its casino operations.

Source: Kenanga Research - 25 Feb 2022