Genting’s businesses set for good returns

Genting Bhd is a good pick for economy recovery play as its businesses should recover quickly from the lifting of cross-border restrictions, says Kenanga Research.

“Also, new casino Resorts World Las Vegas could be a wild card judging from initial data,” noted the research house in its latest report.

For the nine months of 2022,, Genting had turned profitable with core profit of Rm198.8mil from loss of Rm466.1mil with revenue rising 84%.

Kenanga Research said: “This was largely thanks to borders reopening in Malaysia and Singapore which led to a 212% jump in the leisure and hospitality’s segment adjusted earnings before interest, taxes, depreciation, and amortisation (ebitda) to Rm4.04bil on the back of a 125% hike in revenue.

Meanwhile, plantation’s earnings which increased by 23% and oil and gas’ earnings higher by 60% are the other two major earnings drivers as the former benefited from higher crude palm oil prices while the latter gained from higher oil prices and a stronger US dollar.

Kenanga Research reduced its sum-of-theparts-based target price for Genting slightly to RM5.76 from RM5.86 previously based on a 40% discount, which encompasses a holding company discount for its listed entities, and a risk premium to reflect related party transactions.

The risks to Kenanga Research’s recommendation include non-renewal of licences, unfavourable prize payout ratios, weak consumer spending amidst high inflation, and products perceived to be socially undesirable.

CGS-CIMB Research meanwhile said in the third quarter, the group’s Resorts World Genting (RWG) and US operations saw continued recovery, aided by Genting Skyworlds’s contribution and as RWG was closed for the entire third quarter in 2021 during the full movement control order.

Meanwhile, the United States and Bahamas ebitda rose 6.5% thanks to the opening of Hyatt Regency JFK Airport at Resorts World New York City in August 2021, relaxation of travel restrictions at Resorts World Bimini since June 2022 and stronger US dollar versus ringgit.

“The United Kingdom and Egypt Ebitda slid 27.6% owing to higher payroll and related costs given the gradual resumption of operations post-covid-19 and reopening of Crockfords casino in July 2022.

“Thus Genting Malaysia turned around to a core net profit of Rm189mil,” said CGS-CIMB Research.