GGRAsia – GEN Malaysia 4Q profit slips, as coronavirus clouds outlook

GEN Malaysia 4Q profit slips, as coronavirus clouds outlook

Feb 28, 2020 Newsdesk Latest News, Rest of Asia, Top of the deck

Fourth-quarter 2019 net profit attributable to shareholders of casino operator Genting Malaysia Bhd fell 58.4 percent year-on-year on revenue that declined slightly, the company said in a Thursday filing.

Such profit was MYR299.7 million (US$71.2 million) compared to MYR720.1 million in the prior-year quarter. Group revenue for the period was nearly MYR2.44 billion, a decline of 2.6 percent compared to the nearly MYR2.51 billion booked in the same period in 2018.

Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) for the final three months of 2019 stood at MYR551.4 million, down 26.3 percent from the prior-year quarter.

Genting Malaysia declared a dividend of MYR0.05 per ordinary share for financial year ending December 31. The company also declared an additional special dividend of MYR0.09 per ordinary share. The company has its main business at the Resorts World Genting casino complex (pictured in a file photo) in Genting Highlands near Kuala Lumpur, Malaysia’s capital, and also runs casinos in the U.S., the Bahamas, the United Kingdom and Egypt.

The firm said in commentary to Bursa Malaysia on Thursday that fourth-quarter adjusted EBITDA was down due to a decline in EBITDA and revenue in its Malaysian operations in year-on-year terms, by respectively 28.7 percent and 5.5 percent. “Adjusted EBITDA was also impacted by higher gaming duties imposed,” said the company.

Genting Malaysia said it recorded a loss of MYR31.6 million in the three months to December 31 as part of its share of results related to its 49-percent stake in loss-making Empire Resorts Inc, an operator of casinos in the United States. Genting Malaysia completed the acquisition of the stake in the U.S.-based company in November last year.

Empire Resorts owns and operates Resorts World Catskills, a casino complex in upstate New York, approximately 90 miles (144 kilometres) from New York City.

Genting Malaysia said on Thursday that operating results at Resorts World Catskills “have registered marked improvements,” with gaming revenues at the property registering a 33-percent increase in December 2019.

Full-year improvement

For the full-year ending December 31, the group recorded a net profit of just below MYR1.40 billion, compared to a loss of MYR19.6 million in full-year 2018. In 2018, Genting Malaysia had recorded an impairment loss of MYR1.83 billion on the group’s investment in promissory notes related with an investment in a proposed tribal gaming venture in the United States, a project that has faced regulatory issues.

Revenue for full-year 2019 was nearly MYR10.41 billion, up 4.8 percent from the previous year. Adjusted EBITDA for the 12 months however fell by 8.1 percent year-on-year, to MYR2.64 billion.

The group’s Malaysian operations in 2019 were aided by an “improved hold percentage” in the mid and premium player segments, said the casino operator. “Nevertheless, overall volume of business in the gaming segment registered a decline, primarily due to the reduction in incentives offered to customers as part of the group’s cost rationalisation initiatives,” it added. The group’s business in Malaysia saw its adjusted EBITDA decline by 10.8 percent year-on-year, to MYR2.05 billion, “mainly due to the increase in gaming duties imposed,” said the firm.

On Thursday, Genting Malaysia said it expected demand for international travel “to decline in the near-term” following the imposition of travel restrictions and widespread concerns surrounding the Covid-19 outbreak. “The regional leisure and hospitality industry will be adversely impacted, including the gaming industry,” said the company, adding that it was now “more cautious” on the near-term prospects of the leisure and hospitality industry.

Brokerage Nomura quoted Genting Malaysia’s management as saying that visitors to the firm’s Resorts World Genting were “down mid-teens so far in first-quarter 2020”.

“Currently, it is difficult to gauge the impact from Covid-19 on Genting Malaysia’s earnings, but we do see downside risks to our fiscal-year 2020 forecast earnings,” said analysts Tushar Mohata and Alpa Aggarwal in a Friday note.

Genting Malaysia also said it remained “focused on the timely completion” of the outdoor theme park for Resorts World Genting “as ongoing development works approach its final stages”.

It added: “Pre-opening arrangements for the theme park are currently underway as the group prepares to capitalise on the growth in visitation once the domestic and regional tourism sector recovers.”

According to Nomura’s Friday note, the outdoor theme park is scheduled to open in the third quarter this year. The brokerage quoted the casino operator’s management as saying that capital expenditure for Malaysia operations was expected at MYR1.3 billion in 2020.