Review

• Genting Berhad’s (Genting) 1H23 core profit of RM389.4mn came in above our expectations at 59.1% of our full-year forecast but within consensus earnings. The variance was largely due to higher-than-expected earnings contribution from Genting Singapore (GENS). For this quarter, the company declared a first interim dividend of 6sen/share.

• GENT’s 1H23 revenue and adjusted EBITDA expanded by 26.1% and 14.8% YoY to RM12.5bn and RM3.8bn respectively. The increase came mainly from Singapore, Malaysia and US operations that more than offset lower earnings from UK operations, Genting Plantation, and oil & gas operations.

• GENS’ 1H23 revenue and adjusted EBITDA rose 63% and 68% YoY respectively to $S1.08bn and S$452.5mn. The earnings recovery was supported by strong recovery in non-gaming business, and higher win percentage on VIP volume. The hold-adjusted gross gaming volume improved by 3% QoQ to S$547.9mn in 2Q23, driven mainly by increased rolling business volume. Looking forward, management is hopeful that its RWS 1.5 initiatives, which include creating a 20,000 sqm central lifestyle cluster, offering a wide variety of upscale restaurants, specialty shops, entertainment and iconic concept stores, would help regaining some market 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 (see GENM report).

• Resorts World Las Vegas (RWLV) achieved higher revenue of RM1.9bn (21.3% YoY) and adjusted EBITDA of RM375mn (+74.4% YoY) with decent hotel occupancy rate of 98% for 1H23. In terms of quarterly performance, 2Q23 adjusted EBITDA was lower by 28.7% QoQ due to seasonal factor.

Impact

• We raise FY23 earnings projections by 27.8% after revising the win rate higher to 3% on GENS’s rolling volume.

Outlook

• The outlook for RWLV remains sanguine with larger conventions return and major sport events such as Formula 1 Las Vegas Grand Prix. As such, the gaming and non-gaming volume are expected to grow strongly especially in 4Q23.

Valuation

• Given the change in earnings, we raise Genting’s SOP-valuation to RM5.35/share (from RM5.13 previously). We continue to like Genting for its diversified business model and compelling dividend yield. Maintain Buy

Source: TA Research - 25 Aug 2023