Review

• Excluding exceptional items totalling RM451.1mn, Genting’s 9M19 core profit of RM1.9bn came in above our expectation at 92.0% our full-year forecast and 83.7% of consensus estimates. The variance was largely due to higher-than-expected contribution from Genting Malaysia.

• 9M19 adjusted EBITDA declined 1.3% YoY to RM6.0bn with major drag came from Genting Singapore and Genting Malaysia on the back of: 1) lower VIP volume in both Singapore and Malaysia; 2) higher gaming tax in Malaysian and increased entry levy in Singapore. This was offset by higher contribution from US and UK operations.

• GENS’s 3Q19 revenue and adjusted EBITDA declined by 6.7% and 12.8% YoY to S$596.1mn and S$278.0mn, respectively. The earnings disappointment was due to challenging VIP market as well as the rise in casino entry levy. Based on hold-normalised basis, the group would have generated an adjusted EBITDA of S$295mn, a decline of 7% against the same quarter last year. (see GENT report dated 8/11/2019).

• GENM’s 3Q19 EBITDA dropped by 14.8% YoY despite a marginal 1.1% increase in revenue. The earnings decline can be attributed to increase in gaming tax, which ate into Resorts World Genting’s earnings. Also, Hurricane Dorian that hit the Bahamas and higher payroll cost from Resorts World New York City (RWNYC) contributed to weaker earnings too. This was partially mitigated by increased contribution from UK and Egypt operations due to adoption of MFRS16 and lower bad debts. (see GENM report).

Impact

• We tweak Genting’s FY19-21 earnings projections by 17.4%/5.5%/4.6% after consolidating GENM’s revised profit forecast for FY19-21.

Outlook

• For Resorts World Las Vegas (RWLV), construction on both towers has progressed into installing exterior curtain wall, which has been installed up to floor 67. As at Sep-19, the group has incurred US$1.7bn out of total project and land costs of US$4.3bn. RWLV is projected to open in summer 2021.

Valuation

• With the change in GENM’s fair value (from RM3.30 to RM3.27), we cut Genting’s SOP-valuation to RM6.85 (from RM6.87 previously). Maintain Buy on Genting for its chance to participate in the integrated resort development in Japan via Genting Singapore.

Source: TA Research - 29 Nov 2019