KUALA LUMPUR (Jan 21): Despite making losses in the financial year ended Dec 31, 2020 (FY20), Genting Malaysia Bhd (GENM) still paid a hefty dividend of 14.5 sen per share, which amounted to RM1.13 billion.

However, analysts are expecting lower dividends for FY22 as the company recovers from the Covid-19 pandemic.

TA Securities Research analyst Tan Kam Meng said he doubted that GENM will continue to pay large dividends in FY21 and FY22 because the company may need to improve its gearing level.

“Their borrowings have increased, they have issued bonds, their gearing has increased. I don’t think they can continue giving a generous dividend, because this may deteriorate their ratings and they don’t want their debt ratings to be affected as this will have serious implications on their earnings,” Tan told theedgemarkets.com.

According to its FY20 annual report, GENM's gearing ratio was 41% compared to 37% as at FY19. The increase in gearing ratio was mainly due to lower equity as a result of losses recorded in 2020.

The group’s capital expenditure for FY20 stood at RM1.14 billion, incurred mainly for development works relating to Genting Integrated Tourism Plan (GITP) and expansion works at Resorts World New York City (RWNYC). Meanwhile, it was reported by Fitch that GENM has budgeted RM1 billion for capital expenditure (capex) in FY21.

Besides, he noted that GENM has already fully spent its capex, and it is waiting for its Genting SkyWorlds theme park to open.

Citing its channel checks, Maybank Investment Bank Bhd said GENM is fixing software issues and hopes to open its outdoor theme park in time for Chinese New Year, which calls on Feb 1 this year.

“Cashflow wise, they don’t have so much capex to be spent this year,” Tan said.

Thus, he expects GENM to lower its dividend or not pay anything this year.

He also foresees GENM to pay a lower dividend in FY22 as the company achieves profitability.

Another analyst, who declined to be named, opined that GENM may pay a 12 sen dividend in FY22 as he expects the firm to turn around by achieving RM868 million profit.

However, for FY21, he expects a lower dividend of six sen because of the prolonged losses.

“I don’t think from now on there will be any lockdown, with the country going to open up for foreigners to come in, then overall the market sentiment should be better,” he told theedgemarkets.com.

GENM’s net loss narrowed to RM289.25 million for the third quarter ended Sept 30, 2021, from RM704.64 million a year earlier, aided by the recovery of the group’s overseas operations.

Its quarterly revenue fell 42% to RM826.27 million, from RM1.42 billion last year, as its group’s leisure and hospitality business in Malaysia recorded a 99% decrease in revenue to RM17.7 million.

For the nine months ended Sept 30, 2021, GENM almost halved its net loss to RM1.12 billion, from RM2.02 billion in the same period last year, despite revenue shrinking to RM2.27 billion, from RM3.49 billion.

Despite lower losses, GENM has not declared any dividend for FY21.

GENM closed one sen or 0.35% higher at RM2.85, valuing the group at RM16.92 billion.