The Genting Group reported strong YTD earnings results that even beat the expectations of investment houses, Genting Singapore and Genting Plantation reported strong 3Q earnings while Genting Malaysia returned to profitability after languishing since the pandemic.
Investment house Kenanga says the core profit for the period beat expectations, accounting for 76% and 86% full-year forecast and the full-year consensus estimates. The variance against the forecast came largely from stronger leisure & hospitality (L&H) performance at Singapore and Resorts World Las Vegas along with the turnaround at Genting Malaysia on rising footfall even though recovery was more gradual than had been expected it said.
For the quarter the group saw better profit which can be attributed to a strong rebound momentum at Leisure and Hospitality. Footfall including foreign arrivals at RS Singapore and GENM’s RW Genting was up. GENP also saw better profits as margins recovered on lower costs and flattish CPO prices. Higher offtake in China also lifted its power division earnings.
In view of the latest earnings, Kenanga has upgraded the group’s 2023 and 2024 net profit forecasts by 30% and 31%, respectively, to reflect the better earnings from both the casinos as well as its power segment.
It is notable that Genting offers good exposure to L&H potentials in SE Asia (notably Singapore and Malaysia), from the current ongoing post-pandemic recovery to the longer-term regional economic-driven upside. Revenues at GENS and GENM have already recovered and outbound mainland Chinese tourists to SE Asia have yet to reach pre-pandemic levels.
Moreover, GENM’s earnings in Malaysia and USA are weighed down by still heavy marketing and recruitment costs as existing facilities are reopened with new ones commencing operations. Kenanga believes GENM margins should revert to more normal levels as such costs abate. Nonetheless, following the earnings revision, the new TP is nudged up from RM5.20 to RM5.60 based on a 40% discount.
