Review

• Genting Malaysia’s (GENM) 9H23 earnings of RM291.1mn accounted for 51.2% of our full-year estimates and 55.4% of consensus forecast. However, we consider this as within expectations as 4Q23 earnings would be seasonally stronger due to year-end festive season.

• GENM’s 9M23 adjusted PBT grew more than double to RM474.0mn on the back of 21.1% rise in revenue to RM7.5bn. The decent earnings growth was due to low base effect as Malaysia operations remained sluggish last year especially during 1Q22 as not all key markets have opened their borders. In addition, the weak ringgit performance also helped to drive the business volume higher.

• In terms of breakdown, Malaysia operations registered a revenue growth of 27.3% and EBITDA growth of 31.3% YoY for 9M23. This was driven by higher visitations post economic reopening. Elsewhere, US operations recorded 17.5% increase in revenue and 27.6% rise in adj. EBITDA for 9M23, offsetting weaker UK operations with adj. EBITDA contracted by 16.2%.

Impact

• No change to our FY23-25 earnings projections. Conference call highlights

• Malaysia 3Q23 operations have seen its gross gaming revenue (GGR) recovered to 93% of 3Q19 (pre-pandemic) levels. This was supported by strong recovery in VIP volume, which has exceeded 3Q19 by 3%. For 9M23, the total GGR was 83% of the pre-pandemic levels. Looking forward, management expects 4Q23 to remain robust with stable EBITDA margin of 31-33%.

• Visitations to hill-top rose 3% YoY to 5.4mn while visitations to mid-hill was 6.4mn, up 4% YoY in 3Q23. Foreign guests surged 53% mainly came from Singapore, Indonesia, China and India. In terms of hotel occupancy, it remained steady at 90% even with larger room capacity of 10,000 this quarter versus 8,300 in 3Q22. The average room rate was 14% higher YoY.

• Although there are a few parties interested in Miami land sales, the high interest rate environment in US has impeded the process. Management believes it would take a while until interest rate cuts in US for the deal to go through.

• As far as new full-scale casino licences in New York are concerned, the progress is at early-stage. 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

• After the recent price rally, we downgrade GENM to Hold (from Buy previously) with unchanged DCF-valuation of RM2.71/share.

Source: TA Research - 24 Nov 2023