KUALA LUMPUR (Aug 13): CGS-CIMB Securities Sdn Bhd has upgraded its target price (TP) for Genting Bhd to RM7.35 from RM6.90 as the research firm cut its earnings forecast for the casino and hotel operator to reflect the Covid-19 pandemic-driven movement restrictions' impact on Genting Bhd's Malaysian operations.

The consensus outlook for Genting Bhd however appears positive as analysts foresee a V-shaped earnings recovery as early as 2021 from the pandemic-driven movement restrictions' impact.

In a note today, CGS-CIMB analysts Foong Choong Chen and Sherman Lam Hsien Jin wrote in a note that CGS-CIMB maintained its "add" call for Genting Bhd shares after rolling forward the valuation base year to financial year ending Dec 31, 2022 (FY22) and after taking into account Genting Malaysia Bhd's (GenM) higher fair value.

"We cut our FY21F/22F core EPS (earnings per share) for Genting Bhd by 82%/6%, to reflect GenM's earnings cut," Foong and Lam said.

Genting Bhd, which owns a 49.5% stake in GenM, also has a 52.7% stake in Genting Singapore Ltd and a 55.4% stake in Genting Plantations Bhd, according to Genting Bhd's website.

Genting Bhd's net loss widened to RM331.76 million in 1QFY21 from a net loss of RM132.32 million a year earlier while revenue fell to RM2.25 billion from RM4.11 billion, according to the group's Bursa Malaysia filing on May 25, 2021.

For FY20, cumulative full-year net loss stood at RM1.02 billion or loss per share of 26.6 sen versus a net profit of RM1.996 billion or EPS of 51.83 sen a year earlier, according to Genting Bhd's filing on Feb 25, 2021.

Genting Bhd said revenue fell to RM11.56 billion from RM21.62 billion.

Today, Foong and Lam said that post earnings revision, CGS-CIMB sees Genting Bhd's core net profit rebounding to about RM58 million in FY21 before recovering more significantly in FY22 and FY23 as negative effects from Covid-19 subside.

"Key rerating catalyst: Full earnings recovery post-Covid-19," they said.

CGS-CIMB and other research firms today issued notes on Genting Bhd after Genting Singapore reported yesterday its financials for the first half ended June 30, 2021 (1HFY21). 
 
Yesterday, Genting Singapore said in filing with the Singapore bourse that the company's net profit stood at S$88.22 million (about RM275.05 million) in 1HFY21 against a net loss of S$116.68 million a year earlier.

Revenue rose to S$554.79 million from S$448.25 million, according to Genting Singapore.

Today, Public Investment Bank Bhd analyst Eltricia Foong wrote in a note that Genting Bhd's earnings weakness is expected to persist at all its casino operations, particularly in Malaysia, given the prolonged pandemic-driven movement restrictions.

"Genting Singapore, on the other hand, should deliver better performance as Singapore has been able to control the spread of the new (Covid-19) variant relatively well compared to its regional peers. We reckon investors should not be focusing on (Genting Bhd's) near-term earnings setback but towards a gradual improvement in 2022 with the eventual opening of international borders," Foong said.

She said Public Investment Bank, which reiterated its "outperform" call and TP of RM5.40 for Genting Bhd shares, also noted that Genting Bhd's near-term earnings should see some mitigating effect from higher plantation profit, which is supported by the solid performance of crude palm oil prices.

Meanwhile, TA Securities Holdings Bhd analyst Tan Kam Meng said in a note today that TA maintained its "buy" call for Genting Bhd shares with an unchanged TP of RM5.63.

Tan said there is no change to TA's Genting Bhd FY21-FY23 earnings projections as Genting Singapore's 4QFY21 earnings are expected to make up the shortfall, although Genting Singapore's 1HFY21 results only accounted for 27% of TA's full-year forecast for Genting Singapore.

"We continue to like Genting Bhd for its V-shaped earnings recovery and its decent chance in winning a casino licence in Japan (via Genting Singapore)," Tan said.

At Bursa's 12.30pm break today, Genting Bhd's share price rose four sen or 0.86% to RM4.71, valuing the group at about RM18.13 billion.

Genting Bhd has 3.85 billion issued shares.