Genting Bhd (GENT) reported 4QFY21 net loss of RM129.8m against a profit of RM25m in 4QFY20, mainly due to lower contribution from Genting Singapore (GENS) and higher depreciation and amortisation cost. For fullyear FY21, its core net loss of RM1.4bn was higher than our and street estimates of RM930m and RM407m respectively. This was largely due to lower-than-expected contribution from GENS as operations were affected by the resurgence of new Covid-19 cases in Singapore. Despite a downward revision in GENS FY22-23F earnings forecasts, our forecasts for GENT increases by an average of 22%, after taking into account the upward revision in earnings for Genting Malaysia and Genting Plantations on higher CPO price assumption. Consequently, our SOTP valuation for the Group is revised from RM5.70 to RM6.00. We maintain our Outperform call.

• 4QFY21 revenue rose 59% YoY but continued to be loss-making. The Group’s revenue was lifted by stronger contribution from Malaysia, the UK & Egypt and the US & Bahamas. However, this was partly offset by lower revenue from Singapore as Resorts World Sentosa (RWS) was affected by lower visitorship due to an increase in Covid-19 cases. The plantation division performed well, delivering a 50% growth in revenue due to higher palm product prices. Meanwhile, the rise in crude oil prices have lifted the oil & gas revenue by 24%. However, the Group incurred a net loss of RM129.8m mainly due to a 66% decline in Singapore’s adjusted EBITDA from RM672m to RM231m. This was further aggravated by a 32% jump in depreciation & amortisation cost, which we believe was attributed to the opening of Resorts World Las Vegas.

• Outlook. Although businesses in RWS are not likely to rebound strongly given its dependence on large influx of foreign tourists, we believe the relaxation of Covid-19 related regulations and resumption of mutual vaccinated travel lanes should encourage the return of travellers to Singapore over time. As we believe the worst is behind us, we do not expect GENS to post any quarterly losses this year with domestic tourism to continue supporting operations at RWS. Meanwhile, the opening of Genting Malaysia’s outdoor theme park should improve visitorship at Resorts World Genting (RWG) though we do not expect any meaningful earnings contribution to the Group’s profit over the next 1-2 years. Meanwhile, its plantation segment should continue to benefit from the rising CPO prices, contributing 14% of total EBITDA in FY22F.

Source: PublicInvest Research - 25 Feb 2022