Review

• Genting Malaysia’s (GENM) 1QFY24 core profit of RM199.8mn, after stripping out forex loss (RM142.4mn) and other exceptional items, came in below our expectations but within consensus estimates. The variance was largely due to increased losses from Empire Resorts.

• 1Q24 adjusted EBITDA rose 10.3% amid 21.1% growth in revenue. All gaming units reported stronger gaming volume, especially Malaysia operations, thanks to higher visitor arrivals and recovery in win rate. However, at associate levels, Empire Resorts reported higher share of loss at RM73mn vs RM67.4mn loss in 1Q23 (RM48.7mn in 4Q23). UK and US operations chalked up EBITDA of RM73.9mn (+74.3%) and RM153.4mn (+10.8% YoY) respectively, which were partially contributed by weak ringgit performance.

• On QoQ basis, 1Q24 adjusted EBITDA was 26.5% lower despite a marginal 1.6% growth revenue. The weaker performance was due to higher share of losses in Empire Resorts.

Impact

• We trim our FY24-26 earnings projections by 18.7-42.7% to factor in RM150mn share of losses in Empire Resorts. We also take this opportunity to adjust our forex assumptions to USDMYR4.65/4.50/4.50 for FY24/25/26. Conference call highlights

• Malaysia’s gaming segment recorded stronger win rates in both VIP and non-VIP segments, up 53% and 14% YoY respectively. The hotel division also saw higher revenue of 16% YoY with total room capacity increased to 10,000 (+7% YoY) alongside higher REVPAR at RM231 (vs RM212 in1Q23). 1Q24 occupancy rate improved further to 99%.

• Management estimates the additional 2% service tax, effective March 2024, will likely reduce the margins by 1%-pt. It believes the adj. EBITDA margin would sustain at 29-30% for FY24. This represents a marginal decline from 33.4% in 1Q24 for Malaysia operations.

• No specific timeline for the reopening of the two older casinos at Genting Highlands as management remains focus on yield management. SkyCasino has ample capacity to cope with the rise in gaming volume.

• In US, the progress of bidding new full-scale casino licences in New York will delay further to 1Q25, based on the statement made by the New York gaming commissions.

Valuation

• Given the change in earnings estimates, we cut GENM’s DCF valuation to RM3.13/share (from RM3.17/share previously) with unchanged CAPM of 19.3%. We maintain Buy on GENM for its compelling dividend yield 6%.

Source: TA Research - 31 May 2024