Waking from slumber
Maintain BUY call and tweak TP to MYR3.37 (-1sen)
4Q21/FY21 results were better than we expected. After nearly 2 years of losses, GENM recorded a 4Q21 core net profit as all its casinos were open. Furthermore, GENM appears to concur with our view that gaming will not be impacted by Omicron in a major way due to its low mortality rate. Our FY22E/FY23E earnings are little changed (-1%/-2%) and we introduce FY24E earnings. Maintain BUY with a slightly lower DCF-based TP of MYR3.37 (MYR3.38 previously).
FY21 losses narrower than expected
4Q21 core net profit of MYR97.8m brought FY21 core net loss to MYR914.6m; the latter was narrower than we expected at 87% of our FY estimate. As a secondary check, FY21 revenue of MYR4.16b and EBITDA of MYR532.2m were both within our expectations at 101% of our FY estimate. Pleasantly, GENM also announced a special single-tier DPS of 9.0 sen which was 50% above our expectation.
4Q21 core net profit the first since 4Q19
Thanks to fewer new COVID-19 cases in Malaysia in 4Q21, RWG visitor arrivals surged to 4.4m which was the highest since 4Q19. 4Q21 RWG gaming volumes were at a respectable 60% of 4Q19’s level. While 4Q21 RWG EBITDA margin of 37% was positively impacted by a high VIP win rate, the normalised VIP win rate EBITDA margin was marginally lower at 34%. With its other casinos open throughout 4Q21, GENM recorded the first quarterly net profit since the COVID-19 pandemic began.
Cautiously optimistic about FY22
When RWG reopened on 30 Sep 2021, it made available c.2,500 rooms for visitors to book. It has doubled that figure to c.5,000 currently. While GENM stated that the reception of Genting SkyWorlds which opened on 8 Feb 2022 could have been better, it also stated that it is ‘quite happy’ with Chinese New Year (1 Feb to 15 Feb 2022) gaming volumes despite the Omicron wave. This is consistent with our view. Our FY22E/FY23E earnings are little changed (-1%/-2%) and we introduce FY24E earnings.