7 days ago
Analysts Downgrade Genting Malaysia, After Sharp Drop In Q1 Profits
CIMB Investment Bank Bhd (CIMB Securities) has downgraded Genting Malaysia Bhd (GENM) to HOLD from Buy, with a sharply lower target price of RM1.95 from RM2.45, while Hong Leong Investment Bank (HLIB) has reiterated its HOLD call with a revised target price of RM1.82, as both research houses flagged significant earnings pressure from weaker-than-expected performance across domestic and international operations.
GENM's core net profit for the first quarter of FY25 fell 78% year-on-year to RM52 million, which CIMB said was impacted by a broad-based earnings decline across Resorts World Genting (RWG), the US, and UK segments, compounded by higher net interest cost and an elevated effective tax rate. The results were well below expectations, coming in at only 9% and 8% of CIMB Securities' and consensus full-year forecasts, respectively. HLIB similarly noted that GENM's RM31.1 million core profit for the quarter missed its projection by a wide margin, at just 6% of its FY25 estimate.
RWG's gross gaming revenue (GGR) was a key concern, declining 7% year-on-year and 9% quarter-on-quarter, driven mainly by a significant drop in VIP play, which fell 18% year-on-year. Although mass market GGR grew by 7%, it was not enough to offset the overall weakness. CIMB Securities highlighted that hilltop visitations dipped 2% year-on-year, likely impacted by the earlier timing of Hari Raya compared to 2024, which affected non-gaming activities. Meanwhile, EBITDA for the group fell 11% year-on-year to RM869 million, with EBITDA margins shrinking to 31.9%.
In the US and Bahamas, EBITDA contracted 22% year-on-year, pressured by higher labour costs and a weaker US dollar against the ringgit. In the UK and Egypt, earnings fell 25% year-on-year under similar conditions, though they were flat quarter-on-quarter. Share of associate losses from Empire Resorts also widened sequentially. HLIB noted that while revenue in the US & Bahamas rose 8.6% quarter-on-quarter, group-wide earnings recovery was insufficient to match past performance due to structural headwinds in international markets.
CIMB Securities revised its core earnings estimates down by 37–39% for FY25–27, expecting a 29% drop in FY25 earnings before a modest 12% recovery in FY26, aided by anticipated tourist inflows during Visit Malaysia Year. HLIB likewise slashed its forecasts by 36–40%, citing persistently high finance costs, tax burdens and operating volatility in the US.
Despite the earnings headwinds, both brokers pointed out GENM's dividend yields remain relatively attractive at 5.5–6.6% over FY25–27. However, CIMB Securities stressed that valuation at an FY25 EV/EBITDA of 8.3x is only modestly attractive, trading at a 12% discount to its 10-year pre-COVID average. Upside risk remains in the form of a possible full casino licence in Downstate New York, which CIMB Securites estimates could add 40–50 sen to its target price.
GENM shares closed at RM1.82 on 30 May, giving the group a market capitalisation of RM10.26 billion. Related
