4QFY21 core profit of RM306.6m beat expectations with a stronger-than-expected turnaround at RWG helped by high VIP volume coupled with favourable luck factor. Its UK and USA units continued to show solid numbers We believe GENM should benefit from imminent borders reopening. Keep OUTPERFORM on the stock with a higher target price of RM3.83.

4QFY21 came above expectation… with a strong turnaround of RM306.6m core profit from core loss of RM252.7m owing to strongerthan-expected business volume post MCO 3.0 closure. This reduced FY21 core loss to RM719.7m against house/street’s net loss forecast of RM1.15b and RM1.04b. It declared a special NDPS of 9.0 sen in 4QFY21 (ex-date: 14 Mar; payment date: 31 Mar) for FY21 which is higher than our forecast of 6.0 sen but lower than a total of 14.5 sen paid in FY20.

…as pent-up demand from MCO 3.0 reopening turned 4QFY21 results profitable as mentioned above. Business volume for RWG was strong especially from VIP segment with better hold percentage as shown in the segment’s adjusted EBITDA margin of 37% from the normal 30%-33%. 4QFY21 VIP and non-VIP mix was at 63:37. Meanwhile, the UK & Egypt unit reported higher adjusted EBITDA by 75% to RM178.8m due to the recognition of VAT claim on income from gaming machines.

Non-Malaysia casinos led yearly growth. YoY, 4QFY21 core profit of RM306.6m was posted against 3QFY21 core loss of RM152.6m, thanks to RWG turning profitable immediately after reopening while both UK & Egypt and North America units saw solid recovery from losses last year. YTD, FY21 core loss narrowed substantially by half to RM719.7m from RM1.43b thanks to the turning around the non-Malaysia units.

Turning around from 4QFY21 onwards. With RWG already reopened from 30 Sep 2021, we expect earnings to improve further but this should be further helped by the improved operating environment in its UK and US units. Having said that, cost rationalisation such as 30% payroll cut and in other opex items should also help to drive earnings growth. Meanwhile, the new Genting SkyWorlds Theme Park will broaden its non-gaming revenue base. Post 4QFY21 results, we raised FY22 estimate by 21% to reflect the strong recovery locally while introducing our new FY23 forecasts where earnings is estimated to grow 26%.

Border reopening is near, OP maintained. With the government’s target to open borders in 2QCY22, we believe RWG should benefit and recover swiftly from the dismal earnings in the past two years. Thus, we keep OUTPERFORM on the stock with a higher SoP-driven target price of RM3.83 from RM3.41 previously.

Risk to our call is a slower-than-expected recovery in business volume from business disruptions.

Source: Kenanga Research - 25 Feb 2022