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KUALA LUMPUR (Nov 27): Genting Malaysia Bhd (GENM) share price fell more than 2% in Bursa Malaysia morning trading today after the hotel and casino operator yesterday reported a net loss in the third RM704.64 million quarter compared to a net profit of RM410.84 million a year earlier and as the overall market fell today.
At 11:04 am, GENM’s share price fell seven sen or 2.69% to RM2.53 for a market value of approximately RM14.7 billion. The stock saw around 13 million shares traded.
Meanwhile, Genting Bhd, which owns 49.5% of GENM, was down seven sen or 1.65% to RM4.18. The stock saw seven million shares change hands.
At RM4.18, Genting has a market capitalization of approximately RM16.09 billion.
Across the broader market at 11:27 a.m., the 30-share KLCI FBM fell 4.08 points or 0.25% to 1,608.03.
Yesterday, GENM said that its net loss in the third quarter ended September 30, 2020 (3QFY20) brought a cumulative net loss of 9MFY20 to RM2.02 billion versus a net profit of RM1.1 billion from the previous year.
In quarterly terms, GENM said that the pre-tax loss for 3QFY20 was reduced to RM361.3 million from a pre-tax loss of RM1.04 billion in 2QFY20.
Today, TA Securities Holdings Bhd analyst Tan Kam Meng wrote in a note that GENM’s 9MFY20 cumulative core loss, which excludes exceptional items, stood at RM1.2 billion, exceeding loss projections for all TA Securities year and RM812.5 consensus. million and RM824 million respectively.
“We raised the loss of GENM in fiscal year 20 to RM1.6 billion (RM812.5 million previously) after incorporating the weaker-than-expected results as well as the impact of CMCO (Malaysia’s conditional motion control order We also cut our fiscal year 21-22 earnings projections by 30.4% and 1.8% to RM 499 million and RM 1.4 billion, assuming the return of foreign players from 2H21 onwards. .
“Despite lower earnings, we increased GENM’s DCF (Discounted Cash Flow) valuation to RM3.20 (from RM2.93 previously) after advancing our base year to fiscal 21. We reiterate ‘buy’ at GENM, which is one of our favorite ‘vaccine trade,’ Tan said.
Malaysia has implemented the CMCO to curb the spread of the Covid-19 pandemic, which has affected industries such as tourism, aviation and hospitality.
Meanwhile, CGS-CIMB Securities analysts Sdn Bhd, Foong Choong Chen and Sherman Lam Hsien Jin, wrote in a note today that headwinds abound for GENM, but that recovery is imminent for the company, as the firm Research expects GENM’s net earnings to recover in fiscal years 21 and 22.
“We raised the GENM FY20F core net loss to RM1.3 billion to reflect a weaker 4Q20F, but increased FY21 / 22F core EPS by 3% / 6% as we factor in the reduction in operating expenses ( operating expenses).
“We see fiscal year 21F net profit recover to 563 million ringgit, then double in fiscal year 22 as visitors come back in full (partly bolstered by the opening of Genting SkyWorlds in mid-2021). We still project 11 sen DPS (dividend per share) per year in fiscal year 20/21 (with 5 sen DPS final in 4Q20F) before returning to 20 sen in FY22F (pre-Covid-19 level).
“We raised the GENM price target (to RM2.95 from RM2.70) after the earnings improvement (still based on a 15% discount to RNAV (revalued net asset value)),” they said.
Analysts said the full recovery of casino volumes when Covid-19 is finally contained is a potential re-rating catalyst for GENM.
The downside risk for GENM is a worse-than-expected Covid-19 impact, they said.
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