Maybank lowers earnings estimates for Genting group

May 31, 2024 Newsdesk Latest News, Rest of Asia, Top of the deck  

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Maybank Investment Bank Bhd says Malaysia-based Genting Bhd had an “auspicious start” to 2024, driven by “luck” at its gaming operations run by Genting Malaysia Bhd and Genting Singapore Ltd.

On Thursday, Genting Bhd reported first-quarter net profit of MYR998.6 million (US$212.3 million), on revenue that grew by 27.6 percent year-on-year, to MYR7.43 billion.

Resorts World Sentosa (pictured), a gaming resort in Singapore run by Genting Singapore, and Resorts World Genting, operated by Genting Malaysia, are said to be the group’s main assets.

Genting Malaysia also runs casinos in the United States, the Bahamas, the United Kingdom, and Egypt.

Genting Bhd’s first-quarter 2024 core net profit – excluding items which have no cash impact like impairments and unrealised foreign exchange losses – “was the highest since fourth-quarter 2018, albeit driven by a high Resorts World Sentosa VIP win rate,” wrote Maybank analyst Samuel Yin Shao Yang in a Friday note.

Genting Malaysia saw its first-quarter revenue rise 21.1 percent from the prior-year period, to just above MYR2.76 billion. The firm posted a profit of MYR36.7 million for the period.

Genting Singapore saw quarterly net profit circa double quarter-on-quarter and year-on-year, to SGD247.4 million (US$182.8 million), helped by what analysts said was “extremely high” hold in the VIP gambling segment.

In Friday’s memo, Maybank said Genting Bhd’s first-quarter 2024 “core net profit of MYR628.2 million” was above the institution’s expectations, accounting for “30 percent” of Maybank’s full-year estimate.

“On closer inspection, the outperformance was largely driven by a high Resorts World Sentosa first-quarter 2024 VIP win rate of 4.6 percent … and a lower-than-expected Genting Malaysia first-quarter 2024 core tax rate of 27 percent,” said Mr Yin.

According to the analyst, the growth at Resorts World Sentosa “was driven by the en masse return of Chinese visitors to Singapore after visa requirements for them were waived” in early February.

“At Resorts World Genting, Sky Casino has been able to absorb all the gamblers that used to frequent Circus Palace and Hollywood that were shuttered for renovation on 28 February 2024,” he added.

Despite the first-quarter improvement, Maybank said it was lowering its 2024 estimates for earnings per share for the parent company by circa 12 percent.

The institution said the decision to lower the estimates took into account, among other factors, VIP win rates of 3.0 percent at Resorts World Sentosa, as well as higher staff costs and slightly higher reinvestment rates by Genting Singapore.

At Genting Malaysia, Maybank reduced its  2024 earnings estimates by 15 percent “on account of the shuttering of Circus Palace and Hollywood.

Maybank now expects Genting Singapore to report core net profit of SGD718.9 million this year, down from a previous forecast of SGD775.4 million.

Core net profit at Genting Malaysia this year might reach MYR 725.4 million, compared to a previous estimate of MYR860.9 million.

As a result, core net profit at the parent company is now forecast at MYR1.86 billion, down from a previous estimate of MYR2.11 billion.

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