GenT recorded 4Q22 core PATAMI of RM438.2m bringing FY22’s sum to RM669.9m (FY21: -RM1.37bn). The results were within our but above consensus expectations. Notably, RWLV reported a record high quarter thanks to increase in convention travels. We raise our forecasts for FY23/FY24 by +24.8%/+17.3% as we impute forecast upgrade from GenS and RWLV. Maintain BUY with a higher TP of RM6.75 (from RM6.45) based on a 45% discount to our SOP-derived value of RM12.25 as we impute TP change from GenS and earnings adjustment from RWLV. We like GenT for its deep expertise and experience in managing the gaming and hospitality businesses and its well spread operations across different regions which help to mitigate regulatory and country risks.

Within our but above consensus. GenT reported 4Q22 core PATAMI of RM438.2m (+61.8% QoQ; 4Q21: -RM305m), bringing FY22’s sum to RM669.9m (FY21: - RM1.37bn). The results were within our (104.2%) but above consensus (118.8%) expectations. FY22 core PATAMI was arrived at after excluding net EIs of -RM969.8m mainly from impairment loss (-RM525.3m), impairment on receivables (-RM196m), FV loss on financial assets (-RM82.1m), forex loss (-RM251.9m) and subsidiaries disposal gain (+RM98.1m).

Dividend. 9 sen, ex-date: 20 Mar 2023 (4Q21: 11 sen). FY22: 16 sen (FY21: 11 sen).

QoQ. Core PATAMI increased by +61.8% mainly due to improvement from RWG (higher foreign tourist mix), GenS (higher foreign tourist arrival and capacity ramp up) and RWLV (higher convention travels, better luck factor), partially offset by decline in UK gaming (weak consumer sentiment and inflationary pressure), Empire and power segment (lower contribution from Indonesia Banten Plant as a result of scheduled outage starting from 15 Dec 2022).

YoY. Core PATAMI improved to RM438.2m (from -RM305m SPLY) mainly due to improvement from GenS (foreign tourist recovery), RWLV (higher convention travels) and O&G (higher crude oil prices coupled with stronger USD) partially offset by decline in plantation (lower palm product prices) and power (scheduled power outage in Banten Plant) segments.

YTD. Core PATAMI improved to RM669.9m (from -RM1.37bn SPLY) mainly due to improvement from RWG (more operating days), RWS (foreign tourist recovery) and O&G (elevated crude oil price and strong USD).

RWLV reported a record high quarter in terms of both revenue and adjusted EBITDA since operating from July 2021. It recorded 4Q22 revenue of RM1.03bn (+15.5% QoQ; +44.3% YoY) and adjusted EBITDA of RM208.4m (+1.5x QoQ; +1.2x YoY). All segments including casino, hotel and F&B saw record high revenue. The improvement was mainly driven by strong convention travels, recovering local and foreign travels. Management remains optimistic that the segment will continue its improvement in FY23 driven by strong convention travels, new sporting events such as Formula 1 and NFL Pro Bowl in 2023 and better connectivity through Boring Company’s underground transportation system.

Outlook. We believe the group still has legs to go for its recovery mainly driven by (i) the strong recovery in RWS as international visits continue to improve; (ii) RWG from seasonally stronger CNY period and recovering foreign tourist arrivals; (iii) RWLV from return of foreign and convention visitors. The current buoyant crude oil price should continue to benefit the group’s O&G segment. In addition, we also note that coal prices have eased substantially (-48.1% YTD) which should lower the operating cost for the group’s power assets.

Forecast. We raise our forecasts for FY23/FY24 by +24.8%/+17.3% as we impute forecast upgrade from GenS and RWLV (higher revenue and EBITDA margin assumptions).

Maintain BUY with a higher TP of RM6.75 (from RM6.45) based on a 45% discount to our SOP-derived value of RM12.25 as we impute TP change from GenS and earnings adjustment from RWLV. We like GenT for its deep expertise and experience in managing the gaming and hospitality businesses and its well spread operations across different regions which help to mitigate regulatory and country risks. Furthermore, GenT provides an exposure to RWLV which we believe will have a strong growth potential in the longer term.

Source: Hong Leong Investment Bank Research - 24 Feb 2023