Malaysian conglomerate Genting Bhd, which controls a collection of casino resorts distributed across major markets in Southeast Asia, North America, the United Kingdom and Egypt, is likely to see its financial-year 2020 earnings before interest, taxation, depreciation and amortisation (EBITDA) fall 70 percent year-on-year, said a Monday note from Maybank IB Research.
That would be due to “lower Resorts World Sentosa and Resorts World Genting visitor arrivals dealt by the Covid-19 outbreak,” wrote analyst Samuel Yin Shao Yang. He was referring respectively to the parent’s Singapore casino complex, one half of a duopoly in that city-state, run by Genting Singapore Ltd; and to Malaysia’s only casino resort, located in an upland area outside the country’s capital Kuala Lumpur, run by Genting Malaysia Bhd.
Those two firms “typically account” for 80 percent to 90 percent of Genting Bhd group earnings, said Mr Yin.
Maybank suggested Genting Bhd’s financial-year 2021 EBITDA could grow 154 percent year-on-year as the impact of the pandemic in likelihood “moderates”.
“We forecast financial-year 2022 EBITDA to grow by a more gradual 38 percent year-on-year, as Resorts World Genting’s outdoor theme park opens and ramps up,” wrote Mr Yin.
Malaysia’s tourism minister said recently the country might keep its borders closed to international tourists until the second quarter of next year, although a number of commentators, including Nomura, has said Resorts World Genting is less dependent on foreign gamblers than many of its regional peers in the casino-resort sector.
Maybank’s Mr Yin observed that Resorts World Sentosa in Singapore had, in earlier trading periods, been strong on serving locals.
But he stated: “… the 50 percent hike in casino entry levies for Singaporean citizens and permanent residents on 4 April 2019, eroded its gambler base”.
Singapore’s inbound tourism market for overseas visitors could take up to five years to recover from the damage caused by the Covid-19 pandemic, said in late September the chief executive of Singapore Tourism Board.
Maybank also touched on an issue raised recently by Standard & Poor’s Global Ratings: corporate governance at Genting Bhd.
Mr Yin observed: “Financial-year 2019 directors’ remuneration accounted for 9 percent of financial-year 2019 net profit, one of the highest in our research universe.”
More significantly, said Maybank: “The main risk to Genting Bhd’s profitability, and [its] environmental, social and governance credentials, continues to be the recurrence of related-party transactions by Genting Malaysia, with the latest being the acquisition of 49 percent of loss-generating Empire Resorts [Inc] and increasingly stricter regulations being imposed on Resorts World Sentosa.”
He added: “We forecast Empire Resorts to contribute more than MYR100 million [US$24.2 million] in losses per annum.”
Maybank also reiterated its previous reservations about the outlook, in the current global crisis, for the Genting group’s under-development Resorts World Las Vegas casino resort, in Nevada’s main gambling hub in the United States.
“We are unsure if Resorts World Las Vegas will be profitable going forward,” wrote Mr Yin.
“We note that Genting Bhd has been more progressive with dividends despite the downtrend in earnings per share since financial-year 2018. Curiously, Genting Bhd is effectively raising its dividend payout ratio while building the US$4.3 billion Resorts World Las Vegas,” he added.
Maybank nonetheless noted that Genting Bhd was an “active investor in life sciences” firms. “We view these investments as ‘call options’ that could pay off handsomely,” stated the institution.
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