Malaysian Stock: How to Interpret Genting Malaysia's Q1 Earnings?

The Group reported a 21% yoy increase in total revenue, reaching RM2,764.9 million. Adjusted earnings before interest, taxation, depreciation, and amortisation (EBITDA) rose by 10% to RM654.1 million. Profit before taxation improved nearly threefold to RM115.9 million.

Revenue from the Group’s leisure and hospitality business in Malaysia increased by 25% yoy, reaching RM1,748.5 million. This growth was largely driven by a higher overall volume of business in both the gaming and non-gaming segments at Resorts World Genting (RWG).

Adjusted EBITDA rose by 34% to RM583.6 million, despite higher operating expenses due to the ramp-up in business activities. The Group achieved an adjusted EBITDA margin of 33%, marking a two-percentage point increase from 1Q23.

In the United Kingdom (UK) and Egypt, the Group reported a 26% yoy increase in revenue, totaling RM442.4 million. This was primarily due to a higher volume of business across the Group’s estate.

Despite higher payroll-related expenses during the quarter, adjusted EBITDA surged by 74% to RM73.9 million, mainly due to improved operational efficiencies.

In the United States of America (US) and the Bahamas, the Group saw a 13% rise in revenue, reaching RM518.4 million. This increase was mainly driven by higher contributions from Resorts World New York City (RWNYC) and Resorts World Bimini (RW Bimini), both of which continued to improve their operating performance.

Higher adjusted EBITDA by RM15.0 million from the leisure and hospitality businesses in the US and Bahamas due to higher revenue generated offset by higher operating and payroll related expenses in 1Q 2024.

Lower adjusted EBITDA by RM133.1 million from investment & others mainly due to the recognition of net unrealised foreign exchange translation losses of RM130.0 million on the Group’s USD denominated borrowings recorded in 1Q 2024 compared with net unrealised foreign exchange translation losses of RM39.0 million in 1Q 2023.

Excluding the impact of the unrealised foreign exchange translation, the Group’s adjusted EBITDA is higher by 24%.

The Group reported higher profit before taxation of RM115.9 million in 1Q 2024 as compared with RM41.3 million in 1Q 2023, mainly due to:

1. higher adjusted EBITDA as mentioned above;

2. higher interest income by RM17.8 million mainly from higher deposits with financial institutions and money market instruments;

3. higher share of losses in associates, Genting Empire Resorts LLC, the holding company of Empire Resorts, Inc. (“Empire”) by RM5.8 million following the increase in the Group’s effective economic interest in Empire from 76.3% to 89.6% since 1Q 2024.

No dividend has been proposed or declared for the current quarter ended 31 March 2024. Historically, the stock's dividends have been relatively stable, and the current dividend yield is 5.66%.

The global economy is expected to see modest growth, though risks from geopolitical and macroeconomic factors remain. In Malaysia, economic expansion is likely to continue with improvements in external demand and domestic spending, despite inflationary pressures.

The regional gaming market is expected to improve, driven by positive international tourism trends and better global capacity and air connectivity. Visa-free entry for citizens of China and India is anticipated to boost Malaysia's tourism sector.

The Group did not issue any profit forecast or profit guarantee for the financial year, but remains cautious about the short-term outlook but optimistic about long-term prospects.

Malaysia: The Group will enhance yield capabilities and operational efficiencies through technology. Cost management will be optimized, and innovative marketing will broaden customer outreach. New ecotourism projects are planned to leverage Genting Highlands’ unique environment.

United Kingdom: The Group will stay adaptable to market changes, maintain cost discipline, and invest in the Core Casinos division to grow market share.

United States: The Group will monitor new casino opportunities in New York State and focus on growth and profitability. Synergies between RWNYC and Empire’s assets will be leveraged. In the Bahamas, partnerships with cruise lines will increase cruise calls at RW Bimini, and marketing efforts will drive visitation and earnings growth.