Net profit at Asian casino operator Genting Malaysia Bhd doubled in the first quarter of 2017 compared to the prior-year period, helped by lower foreign exchange translation losses, the firm announced on Monday. Such profit for the three months to March 31 was approximately MYR323.5 million (US$75.5 million), compared to MYR161.6 million a year earlier.
The company recorded total revenue of MYR2.22 billion for the period, a marginal growth compared to MYR2.21 billion in the prior-year period. Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 27 percent year-on-year to MYR564.8 million.
“The group’s overall performance was aided by lower foreign exchange translation losses on its U.S. dollar denominated assets of MYR9.4 million recorded in the first quarter of 2017 compared to first quarter 2016 of MYR138.8 million,” Genting Malaysia said.
Genting Malaysia runs Resorts World Genting (pictured in a file photo), Malaysia’s only casino resort, and operates casinos in the United States, the Bahamas and the United Kingdom.
Judged market by market, Genting Malaysia achieved higher revenue in Malaysia during the first quarter of 2017 compared to the same period last year. Revenue for the period went up 3 percent to MYR1.34 billion.
The firm said the higher revenue in the Malaysian leisure and hospitality business was mainly attributed to a “better hold percentage for the mid to premium segment” of the casino business even though business volumes were lower.
Adjusted EBITDA in Malaysia, however, was lower as compared to the prior-year period, “primarily due to higher cost relating to the premium players business and costs incurred for the new facilities under Genting Integrated Tourism Plan (GITP)”.
GITP is a multi-phase plan described by Genting Malaysia as a 10-year, MYR10-billion master plan for a major revamp for Resorts World Genting, which will include a theme park called 20th Century Fox World Malaysia.
“Whilst the GITP development works are still ongoing at Resorts World Genting, the resort welcomed 4.9 million visitors in the first quarter of 2017,” said Genting Malaysia in a filing to Bursa Malaysia. “The group continues to introduce new attractions with the launch of the Sky Plaza this quarter,” it added.
Sky Plaza is the portion of the resort revamp that contains updated gaming space, according to investment analysts.
Japanese brokerage Nomura said that adjusted EBITDA in Malaysia was down “mainly due to first quarter being a transitory quarter where the mass casino floor moved to the new Sky Casino podium, accompanied by a 3 percent year-on-year drop in visitation, mainly due to lower Chinese arrivals (we estimate -9 percent year-on-year)”.
Revamp in progress
In Monday’s filing, Genting Malaysia said that more facilities and attractions under the GITP are to be launched later this year.
“The indoor theme park and retail outlets in First World Plaza are currently closed for a complete makeover and scheduled to re-open next year with more exciting entertainment options,” added the company.
“We expect the VIP gaming area to move to the Sky Casino in third quarter 2017, and the theme park is still scheduled for a first half 2018 opening,” said Nomura analysts Tushar Mohata and Alpa Aggarwal in a note on Tuesday. “Given the front-loaded start-up costs for Genting Highlands’ expansion, we feel that it is prudent to tone down our estimates, and accordingly we reduce our fiscal-year 2017/2018 forecast earnings by 12 percent and 11 percent,” they added.
Genting Malaysia said that revenue was up in year-on-year terms both at Resorts World Casino New York City, in the United States, and at Resorts World Bimini, in the Bahamas.
In contrast, the firm’s operations in the United Kingdom saw lower revenue and adjusted EBITDA because of reduced hold percentage from its premium players business, although higher business volumes were recorded.
Genting Malaysia said it “remains cautious” on the near term outlook of the leisure and hospitality industry, “but remains optimistic on the growth potential of the industry in the longer term”.
“The operating environment for the regional gaming market has shown signs of recovery, as evidenced by the recent reported improved performance of regional gaming operators in Singapore and Macau,” said the company. “Notwithstanding this, the regional gaming market is expected to face continuous challenges in the Asian premium players business,” it added.
The firm said it would continue to focus on the development of GITP “as the remaining facilities and attractions will open progressively from this year onwards”. The group would also optimise overall operational efficiencies, yield management and database marketing efforts, and enhance service delivery at Resorts World Genting, it stated.
In the U.K., Genting Malaysia has seen a strong performance from the non-premium players business and will continue to reduce short-term volatility in its premium players business in order to develop a “more sustainable business”.
The company additionally said that it has embarked on cost rationalisation initiatives in the Bahamas, and will revise its marketing strategy to reposition that business.
