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Monday, December 3, 2018

Genting Malaysia Berhad - Net Loss Due To Impairment

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Genting Malaysia (GENM) reported RM1.49bn net loss for 3QFY18 due to the recognition of RM1.8bn impairment loss on investment in the US promissory notes. This was not a surprise to us as we had highlighted the risk of impairment in our report dated 28th November 2018. Stripping out the impairment and other non operational items, core net profit for 3QFY18 stood at RM359.2m, jumping 51.7% YoY due to stronger contribution from Malaysia’s leisure & hospitality segment. 9MFY18 core net profit came in within our and market expectations. Despite the positive performance at the core level, we think GENM’s share price will remain under pressure given the uncertainties surrounding its investment in the Fox-branded outdoor theme park. Thus far, management has not been forthcoming in providing clarity and we believe this would continue to be a drag to its share price performance. We maintain our Underperform rating on GENM.
  • 3QFY18 revenue rose 14.5% YoY. Group’s revenue was lifted by a 26% jump in Malaysia’s leisure & hospitality revenue due to improved hold percentage in the mid to premium player segments and higher business volume from the mass market. The opening of new attractions under the Genting Integrated Tourism Plan (GITP) has helped to increase business volume. However, this was partly offset by lower contribution from the UK & Egypt and the US & Bahamas due to the impact of forex translation.
  • 3QFY18 adjusted EBITDA jumped 86% but net loss due to impairment. Despite a strong performance at Malaysia’s leisure & hospitality segment, which delivered a solid 91% increase in EBITDA, GENM posted a net loss of RM1.49bn as a result of RM1.8bn impairment loss. GENM was uncertain of the recovery of its investment in promissory notes following the US Federal Government’s decision in September concluding that the Tribe did not satisfy the conditions that allow it to have the land in trust for an integrated gaming resort development.
  • Maintain Underperform. Given the risk of further delay to the opening of its outdoor theme park following its lawsuit against Walt Disney Co and Twenty First Century Fox, we believe GENM’s growth trajectory will be affected by lower visitor arrival. Earlier, we have cut our visitor arrival growth rate from 8-9% to 3% for FY19-20F. We maintain our earnings forecasts for now and reiterate our Underperform rating.
Source: PublicInvest Research - 3 Dec 2018

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