CIMB Investment Bank Bhd (CIMB Securities) and Hong Leong Investment Bank (HLIB) have downgraded their estimates for Genting Malaysia Bhd (GENM) due to significant earnings pressure from weaker-than-expected performance in domestic and international operations.
In its first quarter of FY25, GENM reported a core net profit of RM52 million ($12.2 million), marking a 78 percent decline year-on-year. CIMB attributed this drop to broad-based earnings declines across Resorts World Genting (RWG) and its US and UK segments, compounded by higher net interest costs and an elevated effective tax rate.
The results fell short of expectations, accounting for only 9 percent of CIMB Securities’ and 8 percent of full-year consensus. HLIB echoed this, noting that GENM’s core profit of RM31.1 million ($7.2 million) for the quarter represented just 6 percent of its FY25 estimate.
A major concern for RWG was its gross gaming revenue (GGR), which declined 7 percent year-on-year and 9 percent quarterly, primarily driven by an 18 percent drop in VIP play. Although mass market GGR grew by 7 percent, it was insufficient to offset the overall weakness.
CIMB Securities reported a 2 percent dip in hilltop visitations, likely influenced by the earlier timing of the Hari Raya holiday (in Malaysia) this year, which impacted non-gaming activities. Additionally, the group’s EBITDA fell 11 percent year-on-year to RM869 million ($205.7 million), with margins shrinking to 31.9 percent.
In the US and the Bahamas, EBITDA contracted by 22 percent year-on-year, influenced by rising labor costs and a weaker US dollar against the ringgit. In the UK and Egypt, earnings fell 25 percent year-on-year, although they remained flat quarter-to-quarter.
HLIB noted a slight quarterly revenue increase of 8.6 percent in the US and Bahamas, but overall earnings recovery was hindered by structural challenges in international markets.
CIMB Securities revised its core earnings estimates down by 37–39 percent for FY25–27, projecting a 29 percent drop in FY25 earnings, with a modest recovery of 12 percent expected in FY26 due to anticipated tourist inflows during Visit Malaysia Year. HLIB also cut its forecasts by 36–40 percent, citing persistently high finance costs, tax burdens, and operational volatility in the US.
Despite these challenges, both brokers acknowledged that GENM’s dividend yields remain attractive, ranging from 5.5 to 6.6 percent over FY25–27.
