Genting Malaysia Bhd’s (GENM) earnings recovered sharply quarter-on-quarter in the second quarter ended June 30, 2026 (2QFY26), although profitability remained weighed down by pre-operating costs and higher interest expenses related to its Resorts World New York City (RWNYC) expansion, according to Kenanga Research.
Kenanga said GENM’s core net profit (CNP), excluding RM76 million in non-operating expenses and RM18 million in unrealised foreign exchange losses, stood at RM142 million in 2QFY26, down 40% year-on-year but significantly higher than the RM10 million recorded in 1QFY26.
The research house attributed the quarter-on-quarter recovery largely to the absence of some of the heavy pre-operating expenses incurred in the previous quarter, including recruitment and training costs for RWNYC.
However, higher interest expenses arising from the US$600 million upfront gaming licence payment for RWNYC continued to weigh on profit before tax.
Meanwhile, Resorts World Genting (RWG) and Genting’s UK operations recorded better revenue and EBITDA on a quarter-on-quarter basis, although their year-on-year performance remained broadly flat.
For the first half of FY2026, GENM’s CNP declined 47% year-on-year to RM152 million, with earnings affected by relatively flat EBITDA growth at RWG and weaker performance in the UK.
RWG’s EBITDA was broadly unchanged, rising just 0.2%, while UK EBITDA declined 5%.
RWNYC doubled its US revenue during the first half, but EBITDA increased by only 25% year-on-year as pre-operating expenses continued to weigh on its contribution.
As a result, the improvement at RWNYC was insufficient to offset higher depreciation and interest costs associated with the new property.
GENM’s net debt also increased to RM15.2 billion in 2QFY26, from RM13.7 billion in the previous quarter, resulting in net gearing of 135%.
No dividend was declared for 1HFY26. Kenanga said GENM’s annual dividend per share forecast for FY2026 and FY2027 has been reduced to 5 sen from 7 sen previously.
Despite the near-term earnings pressure, Kenanga remains positive on GENM’s overseas growth prospects, particularly as RWNYC ramps up its casino operations.
RWNYC has commenced casino operations with 242 live gaming tables and 2,465 electronic gaming machines, with plans to increase capacity to 400 live tables and 4,000 machines by the end of FY2026.
Ultimately, the casino is expected to have 800 live tables and 6,000 electronic gaming machines by FY2029.
Kenanga said RWNYC is targeting new gamers, users of John F. Kennedy International Airport and New York players who currently travel to neighbouring states to access casinos offering live gaming.
The research house expects the property’s earnings contribution to improve as operations mature and initial expansion costs stabilise.
GENM’s UK gaming operations are expected to provide another source of earnings growth.
Kenanga noted that the cap on gaming machines at older and smaller UK casinos was increased fourfold to 80 units from July last year.
The acquisition of Aspers Stratford Casinos from administrators and its subsequent relaunch as Genting Stratford Casino has also supported revenue growth.
Although tourism disruption arising from the Middle East conflict could affect the UK market, Kenanga expects the underlying growth momentum to continue.
Expansion-related and restructuring costs, however, have yet to stabilise. Once these costs normalise, the research house expects earnings from the UK business to improve.
Further growth is expected from a new three-storey casino and restaurant at Piccadilly Circus in London, which is scheduled to open in FY2027.
For its flagship RWG operations in Malaysia, Kenanga expects FY2026 earnings to remain subdued, mainly due to weaker overseas tourist arrivals amid the Middle East conflict.
However, relatively resilient domestic visitation should provide some support, particularly in the fourth quarter, when longer school holidays in Malaysia and Singapore are expected to boost visitor traffic.
The extension of the Visit Malaysia Year initiative into 2027 could provide an additional tailwind to tourism-related demand.
Given the slower-than-expected ramp-up at RWNYC and continued high opening costs, Kenanga lowered its FY2026 core earnings per share (CEPS) forecast by 15% to 9.5 sen from 11.2 sen previously.
Its FY2027 CEPS forecast was also cut by 12% to 12.8 sen from 14.5 sen.
Kenanga consequently reduced its target price for GENM by 10% to RM2.70 from RM3.00, based on a price-to-book value multiple of 1.2 times, which is at the upper end of GENM’s historical 10-year range of 1.0 to 1.2 times.
Despite the earnings revisions, Kenanga maintained its Outperform call on GENM, citing what it considers an attractive risk-reward profile.
The research house highlighted GENM’s stronger position at RWNYC, where it expects the group to benefit from being the only full-service casino in New York City for the next three to five years, its increasingly diversified London gaming portfolio and continued upgrades to RWG’s infrastructure and marketing.
Key risks to the investment view include non-renewal of gaming licences, unfavourable prize payout ratios, weaker consumer spending amid elevated inflation and regulatory or social concerns surrounding gaming products.
