KUALA LUMPUR (Nov 25): PublicInvest Research has maintained its “ourperform” rating of Genting Malaysia Bhd (GenM) at RM2.72, with a lower target price (TP) of RM3.50 (from RM3.66), and said GenM had returned to the black after reporting RM11.4 million in net profit for the third quarter ended Sept 30, 2022 (3QFY2022), on the back of higher business volumes in Malaysia and the US and Bahamas.
In a note on Friday (Nov 25), the research house said that for the cumulative nine months ended Sept 30, 2022, revenue and adjusted earnings before interest, taxes, depreciation and amortisation were within expectations, accounting for 75% and 74% of house and consensus full-year estimates respectively.
However, it said core net profit came in below house expectations at 15% of the full-year number, mainly due to higher-than-expected interest cost and tax cost.
“As a result, we revise up our interest and tax cost assumptions, leading to a 16% decline in our FY2022-24 earnings forecasts.
“Operationally, we are seeing gradual improvements following the lifting of Covid-19 related restrictions.
“As such, we maintain our 'outperform' rating, with a revised TP of RM3.50 from RM3.66.
“However, we note that there is downside risk should GenM secure a gaming concession in Macau,” it said.
The research house explained that although it views the Macau venture positively as it should help the group to widen its geographical presence and diversify its casino operations, the venture could also be a drain to its cash flow in the near term.
“Also, competition in the Macau gaming industry is expected to be more intense with the presence of many established and prominent incumbent concessionaires, which is a different ball game compared to Malaysia and Singapore,” it said.
At 9.33am, GenM had shed 1.1% or three sen to RM2.69 a share, with 6.89 million shares done.