Review

• Genting Malaysia’s (GENM) 1HFY24 core profit of RM328.7mn accounted for 41.7% and 40.7% of ours and consensus’ full-year estimates. However, we consider this to be within expectations as we expect a strong 2H24 spurred by higher tourist arrivals. For this quarter, the company declared a first interim dividend of 6sen/share.

• 1H24 adjusted EBITDA rose 36.9% to RM1.4bn underpinned by 14.2% growth in revenue. All gaming units reported stronger gaming volumes, especially Malaysia operations, thanks to higher visitor arrivals and recovery in win rate. However, at associate levels, Empire Resorts’ losses expanded to RM136.6 for 1H24, up 98.8% YoY. UK and US operations chalked up EBITDA of RM138.7mn (+36.1%) and RM330.1mn (+16.1% YoY) respectively, as the stronger gaming volumes more than offset the rise in payroll costs.

• On QoQ basis, 2Q24 adjusted PBT was seasonally weaker by 3.1% amid 3.5% decline in revenue. The decline was aggravated by higher tax expense, leading to 35.5% dropped in core profit to RM128.9mn.

Impact

• No change to our FY24-26 earnings projections. Conference call highlights

• 2Q24 gross gaming revenue (GGR) jumped 10% YoY with a mix of 55% VIP vs. 45% non-VIP volume and a normalised hold percentage. This was slightly different from 50:50% mix and below-norm hold percentage seen in 2Q23. Cumulatively, the GGR increased by 21% with a mix of 56% VIP vs. 44% non-VIP volume. Overall, the group has seen stronger VIP volume in 2024.

• Visitations to mid-hill rose to 7mn (+15% YoY) while visitations to hilltop surged to 5.9mn in 2Q24 (vs 5.4m in 2Q23 and 5.8mn in 1Q24). Specifically, foreign tourist arrivals jumped 15% YoY mainly from Singapore (+9%), Indonesia (+3%) and China (+>100%). According to management, the rise in Chinese tourists in 1H24 was still below 2019 by 38% in terms of room sold. The hotel occupancy rate was 99% with REVPAR of RM233 in 2Q24.

• Genting Skyworlds Theme Park has opened 17 out of total 19 rides with ticket sales increased 15% YoY to average 3,000 tickets/day in 2Q24. Management attributed the increased ticket sale to reduced operating downtime.

• Management reiterates that the EBITDA margin for Malaysia operations after factoring in the additional 2% service tax would be around 30-33%. As such, the 2Q24 EBITDA margin of 32.5% was within the guidance.

Valuation

• We maintain GENM’s DCF valuation to RM3.13/share with unchanged CAPM of 19.3%. Maintain Buy on GENM for its compelling dividend yield of more than 6.0%.

Source: TA Research - 30 Aug 2024