GENM: Gaming Operator’s Quarterly Net Profit Lifted by Forex Gains Amid Operational Headwinds

A major gaming operator reported a headline net profit of RM145.9 million for the fourth quarter of fiscal year 2025, a significant turnaround from a loss of RM458 million in the previous year. This positive swing was primarily attributed to stronger contributions from its United Kingdom operations and a favourable foreign exchange movement impacting its USD borrowings. However, after stripping out non-operating items, the core net profit stood at RM39.1 million, compared to a loss of RM91.6 million in 4QFY24. Despite the improved quarterly figures, the full-year results fell short of both the bank’s and consensus expectations.

Performance Review

The 10.4% year-on-year revenue increase was largely propelled by enhanced contributions from the UK & Egypt and the US & Bahamas regions. Specifically, the newly acquired Stratford casino and overall higher business volume boosted UK revenue by 17%, while the consolidation of Genting Empire led to a 55% jump in US revenues. This growth was partially tempered by a dip in revenue from Malaysian operations, which experienced lower business volume. The notable core net profit was further underpinned by lower operating expenses in both the UK and US.

Future Outlook and Challenges

Following the report, the investment bank has revised its 12-month target price to RM2.14, down from the previous RM2.35 (voluntary offer price), based on a Sum-of-the-Parts (SOTP) valuation. Consequently, the rating for the operator has been downgraded from Trading Buy to Neutral, citing limited upside potential with an expected return of 5.4%.

While the market generally maintains an optimistic view regarding the operator’s expansion into a full-scale casino operation in New York, the bank expresses concerns over potential start-up costs associated with converting the existing facility into an integrated resort, a project estimated at USD5.5 billion. Although the New York casino could commence table game operations by mid-2026, ahead of competitors, a weakening consumer confidence in the US market could constrain visitor growth. Additionally, a strengthening Ringgit against the USD poses a risk, potentially leading to lower translated revenue for its US operations. The “Visit Malaysia Year 2026” is anticipated to boost tourist arrivals, but this is not expected to directly translate into significantly higher gaming revenue.

The bank’s cautious stance reflects a view that the initial impact on the group’s profit from the New York expansion could be muted, or even negative, given the substantial upfront investments and prevailing market conditions.