Review

• Genting Berhad’s (Genting) 9M24 core profit of RM1.2bn missed expectations at 57% of our full-year forecast and 66% of consensus estimates. The variance was largely due to lower-than-expected contribution from Genting Singapore and Resorts World Las Vegas.

• Genting’s 9M24 revenue and adjusted EBITDA expanded by 5.0% and 8.3% YoY to RM20.8bn and RM7.1bn respectively. The increase in EBITDA came mainly from all gaming units except Singapore and US operations.

• GENS’s 9M24 adjusted EBITDA declined 7.3% to S$734.7mn despite higher revenue of S$1.9bn, up 8.3% YoY. The decline was mainly due to lower win rate, especially in 3Q24. Note that the 3Q24 revenue and adjusted EBITDA plummeted by 18.5% and 52.5% YoY respectively owing to lower VIP rolling volume and win rate resulted from the heightened competition and global uncertainty.

• GENM’s 9M24 adjusted EBITDA (exc. forex gain) rose 19.0% to RM2.1bn underpinned by 9.6% growth in revenue. All gaming units reported stronger earnings during this period, led by UK (+20.7%), US (+8.2%) and Malaysia (+4.5%) operations. However, at associate levels, Empire Resorts’ losses expanded to RM167.3mn for 9M24 compared to RM99mn losses for the same period last year (see GENM report).

• Resorts World Las Vegas’s (RWLV) 9M24 revenue declined 4.6% YoY to RM2.8bn while the adjusted EBITDA dropped 17.9% to RM501mn. The lacklustre performance was due to an abnormally hot summer in Las Vegas and economic uncertainty in an election year, crippling the growth of gaming volume and hotel occupancy.

Impact

• We cut GENT’s FY24-26 earnings lower by 11.7-22.0% after revising GENS and RWLV’s earnings lower by 10-18% and 21-25% respectively.

Outlook

• Pertaining to the allegation of allowing suspected and proven criminals to gamble, the investigation is still on-going as the group requested for a time extension to 9 December 2024 to respond to the complaint.

• Looking forward, the Trump tariff 2.0 is expected to put the global economy into a tailspin, leading to slowdown in economic growth and global inflation. We believe the uncertainty would persist until 1H25 when the market is clear about the tariff plans. As such, the VIP volume is expected to remain weak on cautious sentiment.

Valuation

• Despite the cautious sentiment, Genting shares have dropped to an attractive level, no thanks to a possible FBMKLCI dropout. We reiterate our Buy recommendation with a revised target price of RM4.42 (from RM4.76 previously) (Figure 1).

Source: TA Research - 29 Nov 2024