PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 23 Jun 2021, 10:10 AM


Genting Berhad - GENS: Pandemic Continues To Affect Earnings

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Genting Bhd’s (GENT) 52.7%-owned subsidiary, Genting Singapore (GENS), reported a 26% YoY decline in 1QFY21 net profit to SGD34.5m, as the impact of the Covid-19 pandemic continued to weigh on operational performance. Although the results came in below our full-year estimates, we maintain our earnings forecast as we expect the global rollout of vaccination programmes would lead to a gradual recovery of economic activities. Nevertheless, the pace of recovery could be dampened by the recent resurgence of virus cases in several of its key markets. Despite the risk of a slower-than-expected recovery, we continue to believe that the worst is over for the group. We reiterate our Outperform call and TP of RM5.18 for GENT.

  • 1QFY21 revenue and net profit fell 32% and 26% respectively. Operational performance of the tourism industry continued to be affected by the impact of Covid-19 pandemic. Non-gaming revenue posted a larger decline of 56% YoY compared to a 19% drop in gaming revenue. We attribute this to low occupancy and utilization rates of its hotels and theme park operations given the lack of international visitors to Singapore. Net profit saw a smaller decrease due to various support measures initiated by the Singapore Government.
  • Outlook. Resorts World Sentosa (RWS) has been developing new events and promotions to attract domestic tourists. However, we believe international borders are likely to remain restricted in the near term until we are closer to achieving herd immunity, perhaps in early 2022. This suggests that the operations of its leisure & hospitality segment should continue to run below optimal rate in FY21F. Nevertheless, given the rollout of vaccination programmes globally, we are of the view that a complete lockdown of the global economies is unlikely to recur in the future. Meanwhile, revisions to GENS’ SGD4.5bn mega expansion plan are on-going and these include health and safety protocols to provide reassurance to its visitors. The USD4.3bn Genting Las Vegas is scheduled for opening on 24 June 2021. We generally believe the new integrated resort will remain in net loss in the initial years of operations given the badly affected tourism and hospitality sector, following the onslaught of a global pandemic. Post-Covid-19 era is likely to see a slow build-up and coupled with a potential increase in depreciation charges, we do not expect GLV to contribute positively to the group’s bottomline over the next 2-3 years.

Source: PublicInvest Research - 10 May 2021

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