GENS drove 1Q22 earnings miss
? 1Q22 core net loss of RM173m is below expectations. Key variance: GENS.
? FY22F core NP may rebound to RM651m, then up 83%/33% in FY23F/24F.
? Reiterate Add, with a slightly higher SOP-based TP of RM6.95.
1Q22 earnings missed due to weaker-than-expected GENS
Genting’s (GENT) 1Q22 core net loss of RM173m w as 33.3% narrower yoy (-1.8% qoq),
as stronger Genting Malaysia (GENM) and Genting Plantations (GENP) earnings more
than offset Resorts World Las Vegas’s (RWLV) losses. 1Q22 is tracking behind
our/Bloomberg consensus FY22F core net profit forecasts of RM800m/RM1.21bn. Key
variance: weaker-than-expected Genting Singapore (GENS) earnings.
GENM’s yoy earnings rebound fueled by a full quarter of operations
GENM’s 1Q22 Malaysia leisure and hospitality adjusted EBITDA rebounded to RM263m
(vs. -RM84m in 1Q21; hit by Resorts World Genting’s [RWG] 1-month closure and the
interstate travel ban); it fell 26.6% qoq on softer visitor arrivals (surge in Covid-19 cases),
low er VIP hold rates and higher costs. 1Q22 gross gaming revenue w as at 50% of preCovid-19 levels. US & Bahamas EBITDA grew 13.7% yoy, on the full lifting of operating
restrictions and a state capital aw ard for Resorts World New York City’s expansion, but
slid 33.2% qoq due to the Covid-19 Omicron variant. UK & Egypt’s EBITDA also
rebounded to RM85m yoy (1Q21: -RM52m; -52.6% qoq) on a full quarter of operations.
Thus, GENM’s 1Q22 core net loss narrow ed 84.7% yoy to RM73m (4Q21: +RM194m).
High CPO prices propelled GENP earnings; RWLV hit by Omicron
Despite a recovery in gaming and non-gaming revenues, GENS’s 1Q22 core net profit
eased 2.1% yoy (+23.4% qoq) due to higher utilities cost and government support
measures in 1Q21. Qoq, non-gaming revenue eased 16.2%, owing to operating capacity
restrictions. Elsewhere, GENP’s core net profit jumped 88.1% yoy (-28.9% qoq), mainly
due to improved palm product prices and dow nstream margins. Despite the lifting of the
statew ide public indoor mask mandate in mid-Feb 22, RWLV’s 1Q22 revenue/EBITDA
fell 4%/40% qoq to US$164m/US$14m, as visitor volumes w ere hurt by a surge in Covid19 cases in Nevada.
Reiterate Add; SOP-based TP raised slightly to RM6.95
We cut GENT’s FY22-24F core EPS by 2.1-18.6% after factoring in low er earnings at
GENM (housekeeping) and GENS (delayed return of tourists, higher utilities cost), partly
offset by higher GENP contribution (higher CPO prices). GENT’s TP rises slightly as w e
roll over the valuation base year and reflect GENT HoldCo’s updated net debt position,
partly offset by low er fair values for GENS (-15 sen, due to earnings cuts) and GENP (-5
sen, after raising the discount to its SOP fair value) and a higher 4.5% risk-free rate
(previous: 3.5%, amid the recent rise in government bond yields). Re-rating catalyst: full
earnings recovery post-Covid-19. FY22-24F yields are decent at 3.1-4.5% p.a. Key
downside risks: worse-than-expected Covid-19 and RWLV net losses.