Maybank Investment Bank has cut its profitability expectations for Genting for the full-year ending December 31, 2023, with Genting Malaysia on slower-than-expected recovery in foreign visitor arrivals and Genting Singapore on lower-than-expected EBITDA margin.
In a Wednesday note, Maybank said it had cut Genting‘s earnings per share (EPS) by 24 percent for FY23 and 8 percent, 5 percent for FY24 and FY25, respectively.
Analyst Yin Shao Yang said that “We still expect earnings to recover to FY19 levels by FY25. Thus, we opine that our investment thesis on Genting as a post-COVID recovery play still holds”, despite trimming the earning forecast for both Genting Malaysia and Singapore.
The Investment Bank maintains a “Buy” rating on Genting‘s shares due to the gradual recovery of the Malaysian ringgit as the analyst believes that the Malaysian currency recovery is a positive factor for the company’s valuation.
“We continue to like it fundamentally as a post-COVID recovery play. More than a decade of historical data tells us that the recovering Malaysian ringgit is a share price catalyst. GENT now scores higher in our proprietary ESG scoring methodology at 59 (46 previously).”, it wrote.
Yang also notes that ROEs have fallen from >10% pre-FY12 to <10% post-FY18 due to Resorts World Sentosa in Singapore “being pressured by the weak Chinese economy”.
Regarding swing factors for the company’s performance, Maybank mentions that the mass market mix tilting towards the mass market will expand margins due to fewer commissions and rebates. And as Genting Malaysia is expanding RWG via Genting Integrated Tourism Plan (GITP), it is expected to have higher visitor arrivals to RWG as GITP’s purpose is to attract more high-margin mass market gamblers.
The report also notes that there are still bad debt issues, as the Chinese account for most of Genting Singapore and Genting UK VIPs, but gambling debts are not enforceable in China.
