Covid-19 closures push Genting into the red with RM133m quarterly loss

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KUALA LUMPUR (May 21): Following the temporary closure of the group’s resorts and casinos worldwide due to the Covid-19 outbreak, Genting Bhd sank into the red with a net loss of RM133.32 million for the first quarter ended March 31, 2020 (1QFY20), from a net profit of RM561.64 million last year.

Revenue came in 26.26% lower at RM4.11 billion versus RM5.57 billion previously, the group's stock exchange filing today showed. The last time the group fell into the red was over a year ago in 3QFY18, when it posted a net loss of RM275.8 million following a huge impairment loss related to an investment by 49.52%-owned Genting Malaysia Bhd (GenM).

Besides the absence of disposal gain — Genting enjoyed a one-off gain of £26.6 million (about RM138.7 million) on the disposal of an indirect subsidiary in the UK in 1QFY19 — the group recognised a wider impairment loss of RM482.5 million for 1QFY20, as opposed to RM17.8 million for 1QFY19. It also recorded a share of loss from joint ventures (JVs) and associates of RM108 million, compared to a share of profit of RM2.4 million previously, according to its stock exchange filing today.

The impairment losses came mainly from GenM's investments in certain assets due to the pandemic's impact, said Genting. Of the total impairment, RM223.3 million related to assets of Resorts World Birmingham, RM182 million to certain casino licences and assets in the UK, and RM66.5 million related to assets of Resorts World Bimini. Genting's share of loss from its JVs and associates, meanwhile, was mainly due to GenM's share of loss of RM100.1 million on its associate Empire Resorts Inc.

The group's adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) fell 41.2% for 1QFY20 to RM1.21 billion from RM2.06 billion for 1QFY19.

Notably, profit before tax (PBT) of Genting's leisure and hospitality business saw strong double-digit contractions of 38% in Malaysia, 53% in Singapore, 78% in the UK and Egypt, and 48% in the US and Bahamas.

On its prospects, Genting said GenM had warned that its financial results for the remainder of FY20 would be adversely impacted by the unprecedented closure of its casinos worldwide due to the pandemic. GenM is also working on a revised timeline for the completion and opening of its outdoor theme park as development works on the theme park have been affected by the movement control order (MCO) in Malaysia.

“In the meantime, GenM Group will continue to implement various aggressive cost-control measures across all its operating entities, including reductions in operational expenditure such as payroll and related costs and the cancellation or deferment of non-essential capital expenditure,” said Genting.

Earlier today, theedgemarkets.com reported, quoting sources, that GenM will undertake a sizable retrenchment exercise, "involving about 10% to 20% of its staff force that stands at 20,000".

Likewise, Genting Singapore Ltd (GenS) was pessimistic about its outlook as it cautioned that its flagship Resorts World Sentosa would continue to face significant challenges. Notwithstanding that, GenS has a strong balance sheet that will enable it to continue operating smoothly and pursue growth despite the ongoing crisis, according to Genting.

"Japan's IR (integrated resort) investment opportunity continues to feature in GenS’s long-term growth strategy. GenS has been engaged in the ongoing request for concept (RFC) by Yokohama city and is anticipating the launch of a request for proposal (RFP) in the second half of 2020," Genting said.

Meanwhile, Genting updated that the construction of Resorts World New York City's expansion, which has been halted in compliance with government directives, is expected to restart soon.

The state of Nevada, on the other hand, has deemed construction as an essential licensed business and hence construction of Resorts World Las Vegas (RWLV) continued to progress. Total development and land costs incurred for RWLV as of March 31, 2020 were approximately US$2.1 billion (RM9.12 billion).

Projected to open in summer 2021, RWLV will combine traditional and modern architecture, weaving a new luxury hotel experience into the fabric of Las Vegas with Asian-inspired touches, progressive technology and world-class guest services, said the group.

Genting shares closed one sen higher at RM4.08 today, giving the group a market value of RM15.82 billion. Year to date, the stock has fallen 31% from RM5.91.

See also:
Genting Malaysia slashes headcount when chips are down
Genting Malaysia loses RM417.9m in 1QFY20