GENS’s FY22 results met expectations with core earnings surging 2.5x YoY to SGD340.1m, underpinned by borders reopening in the region. On a roll, it has received another shot in the arm with China’s reopening since Jan 2023. Thus, we raise our FY22F earnings of parent GENTING by 6%, but maintain our TP of RM5.76 and OUTPERFORM call.

GENS’s FY22 core profit of SGD340.1m met expectations. YoY, FY22 core profit surged 150% to SGD374.3m from SGD149.5m in FY21 on the back of a 62% jump in revenue to SGD1.73b from SGD1.07b previously, led by recovering regional tourism while gaming revenue was led by the more affluent and premium customers who stayed slightly longer, especially in 2HFY22. According to Singapore Tourism Board, the island state registered total tourist arrivals of 6.3m in 2022, beating forecasts of 4m-6m, compared to only 330,000 tourist arrivals registered in 2021. QoQ, results were fairly flattish with core profit inching up merely 1% to SGD133.3m in 4QFY22 while revenue grew 4% over the quarter to SGD542.5m

We raise our FY22F earnings of parent GENTING by 6%, incorporating GENS’ FY22A results but keep FY23F earnings unchanged for now.

Despite the booster from China’s reopening since Jan 2023, the group to a certain extent is constrained by the availability of flights and affordable fares, as well as inflation crimping consumer spending. Nonetheless, the company is ready to cater for more visitor arrivals with its on-going RWS 2.0 expansion plan.

Maintain OUTPERFORM on GENTING. We are optimistic that the two-year lackluster earnings streak at GENS had ended in 1HFY22 with the reopening of international borders from April 2022 as well as China’s reopening early this year. And, the same would apply to GENM as well. This should eventually benefit parent-company GENTING. For now, pending the release of the group’s 4QFY22 results this Thursday (23 February), we are keeping our OP call and TP of RM5.76 (at a 40% discount to SoP valuation to encompass a holding company discount and a risk premium to reflect related party transactions) for GENTING. There is no change to our TP based on ESG given a 3-star rating as appraised by us (see Page 5).

Risks to our call on GENTING include: (i) non-renewal of incenses, (ii) unfavourable luck factors, (iii) weak consumer spending amidst high inflation, and (iv) products perceived to be socially undesirable.

Source: Kenanga Research - 21 Feb 2023