Review

• Genting Malaysia’s (GENM) 1H23 earnings of RM82.4mn accounted for 14.5% of our full-year estimates and 12.4% of consensus forecast. However, we consider this as within expectations as 4Q23 earnings will be seasonally stronger due to year-end festive season. For this quarter, the company declared a first interim dividend of 6sen/share.

• GENM’s 1H23 revenue grew 22.1% YoY to RM4.8bn with higher contributions from all operating units except UK & Egypt operations. However, 1H23 adjusted EBITDA was flat at RM1.0bn as all units were hit by higher operating costs especially payroll.

• In terms of breakdown, Malaysia operations registered a revenue growth of 31.6% and EBITDA growth of 34.2% YoY for 1H23. This was driven by higher visitations post economic reopening. Elsewhere, US operations recorded 20.8% increase in revenue and 41.6% rise in adj. EBITDA for 1H23, offsetting weaker UK operations with revenue and adj. EBITDA contracted by 4.4% and 38.6%.

Impact

• No change to our FY23-25 earnings projections. Conference call highlights
• Visitation to mid-hill was 6.1mn (5.4mn to peak) in 2Q23, an increase from 5.6mn (4.9mn to peak) in 2Q22. Cumulatively, 1H23 total visitation was 11.8mn, up 19% YoY. Meanwhile, foreign visitors grew more than 100% to 511k in 2Q23 as the group increased room supply to 10k now from 5900 rooms last year. The increase in foreign visitors came mainly from Singapore, Indonesia and China. Looking forward, management is optimistic on the operational outlook as weak ringgit and China’s reopening factors would continue to attract foreign players to Resorts World Genting Highlands.
• With regards to Miami land sales, the company is in talk with other interested parties after the offer made to the company lapsed a few months ago. Without sharing any specific timeline, management indicates the sale process has to meet all criteria by both parties.

• As far as new full-scale casino licences in New York are concerned, the award would likely be in 1H24 from previous guidance of end-23. We remain bullish on GENM’s chance in securing one of the 3 licences given its existing gaming operations in Resorts World New York City.

Valuation

• We maintain our Hold recommendation on GENM with unchanged DCF-valuation of RM2.71/share.

Source: TA Research - 25 Aug 2023