PUBLIC INVESTMENT BANK
PublicInvest Research Company Update
KDN PP17686/03/2013 (032117)
GENTING MALAYSIA BERHAD Restructuring of Loss-Making Unit
DESCRIPTION
Major gaming operator with casino properties in Malaysia, United Kingdom and United States. Owns the sole casino license in Malaysia.
| 12-Month Target Price | RM1.84 |
| Current Price | RM2.02 |
| Expected Return | -8.9% |
| Previous Target Price | RM1.66 |
| Market | Main |
| Sector | Gaming |
| Bursa Code | 4715 |
| Bloomberg Ticker | GENM MK |
| Shariah-compliant | No |
SHARE PRICE CHART
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
Mar-25
Apr-25
May-25
Jun-25
Jul-25
Aug-25
| 52 Week Range (RM) | 1.46-2.58 |
| 3-Month Average Vol (‘000) | 7,685.6 |
SHARE PRICE PERFORMANCE
| 1M | 3M | 6M | |
|---|---|---|---|
| Absolute Returns | 0.0 | 14.8 | -14.3 |
| Relative Returns | -2.2 | 13.2 | -16.1 |
KEY STOCK DATA
| Market Capitalisation (RM m) | 11,448.8 |
| No. of Shares (m) | 5,667.7 |
MAJOR SHAREHOLDERS
| % | |
|---|---|
| Genting Bhd | 49.5 |
Restructuring of Loss-Making Unit
Genting Malaysia (GENM) announced the restructuring of its loss-making unit, Empire Resorts Inc (Empire), which recently became a wholly-owned subsidiary following the completion of a related party transaction. Empire has proposed to sell and leaseback its non-gaming assets as well as acquire a parcel of land with the proceeds to be raised from the proposed disposal. In addition, it will redeem USD300m bond that would result in Empire becoming debt-free. While this restructuring appears to be positive as it would reduce Empire’s operating costs and help address its earnings pressure, details of the various agreements (lease and management agreements of the non-gaming assets) have yet to be finalised at this juncture. However, given the recent decline in GENM’s share price and the potential benefit of this proposed restructuring, we upgrade our rating to Neutral.
- Details of the restructuring. Empire, a wholly-owned subsidiary of GENM, announced the proposed disposal of its non-gaming assets comprising two hotels, 18-hole golf course, entertainment centre and multiple restaurants to Sullivan County Resort Facilities Local Development Corporation (Sullivan) for a cash consideration of USD525m. Proceeds from this disposal will be used to purchase land measuring 1,554.6 acres from EPR Properties (EPR) for USD201.3m cash and to redeem USD300m of Empire’s bond. Meanwhile, Empire will lease these non-gaming assets through 2066 that will be managed by Sullivan under a 20-year agreement with automatic renewal for two successive 5-year period. Note that Empire is the owner and operator of Resorts World Catskills in New York.
- Preliminary benefits. The proceeds from the proposed disposal will allow Empire to fully redeem its bond, resulting in Empire being debt-free and therefore, focus on improving its operations that have been suffering from high operating costs and low business volume due to competition and muted consumer sentiment. Currently, Empire is paying lease rental to EPR but the proposed acquisition of the land would lead to the elimination of these lease payments. Empire will own the land which will be unencumbered by debt. Resorts World Catskills’ gaming and non-gaming assets sit on this land (420 acres) but there is vacant land measuring 1,134.6 acres that has yet to be developed.
- Our view. We note that this restructuring appears to benefit Empire as it helps to enhance its cost structure and alleviate pressure on earnings. However, details of its future lease and management agreements with Sullivan remain unavailable and will be announced in due course. For now, we maintain our FY25-27F earnings forecasts on GENM, which we had earlier cut by 10-16% to reflect higher share of losses from Empire. Given the sharp decline in its share price while this restructuring is likely to improve its cost structure in the future, we remove the 10% discount ascribed to our SOTP valuation. Our TP is revised to RM1.84. Upgrade GENM to Neutral.
KEY FINANCIAL SUMMARY
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F | CAGR |
|---|---|---|---|---|---|---|
| Revenue | 10,189.4 | 10,911.8 | 10,186.4 | 10,711.8 | 11,428.8 | 2.3% |
| Operating Profit | 1,202.5 | 1,056.9 | 1,154.4 | 1,171.7 | 1,377.2 | 14.1% |
| Pre-tax Profit | 674.2 | 486.7 | 576.9 | 621.5 | 838.1 | 31.2% |
| Core Net Profit | 356.6 | 387.7 | 518.5 | 552.3 | 716.9 | 36.0% |
| EPS (Sen) | 6.3 | 6.8 | 9.1 | 9.7 | 12.6 | 36.0% |
| P/E (x) | 32.1 | 29.5 | 22.1 | 20.7 | 16.0 | |
| DPS (Sen) | 15.0 | 10.0 | 10.0 | 10.0 | 10.0 | |
| Dividend Yield (%) | 7.4 | 5.0 | 5.0 | 5.0 | 5.0 |
Source: Company, PublicInvest Research estimates
KEY FINANCIAL DATA
INCOME STATEMENT DATA
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue | 10,189.4 | 10,911.8 | 10,186.4 | 10,711.8 | 11,428.8 |
| Operating profit | 1,202.5 | 1,056.9 | 1,154.4 | 1,171.7 | 1,377.2 |
| Net interest | -528.3 | -570.2 | -577.5 | -550.2 | -539.1 |
| Pre-tax Profit | 674.2 | 486.7 | 576.9 | 621.5 | 838.1 |
| Income Tax | -313.4 | -324.6 | -138.5 | -149.2 | -201.1 |
| Effective Tax Rate (%) | n.a | 66.7 | 24.0 | 24.0 | 24.0 |
| Reported Net Profit | 436.8 | 251.3 | 518.5 | 552.3 | 716.9 |
Growth
| 2023A | 2024A | 2025F | 2026F | 2027F | |
|---|---|---|---|---|---|
| Revenue (%) | 18.4 | 7.1 | -6.6 | 5.2 | 6.7 |
| Pretax Profit (%) | >(100) | -27.8 | 18.5 | 7.7 | 34.8 |
| Net Profit (%) | >100 | -42.5 | 106.3 | 6.5 | 29.8 |
Source: Company, PublicInvest Research estimates
BALANCE SHEET DATA
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| PPE | 14,497.5 | 13,779.2 | 14,190.7 | 14,055.4 | 13,931.0 |
| Other long-term assets | 8,441.8 | 8,376.5 | 7,345.1 | 7,065.0 | 6,258.7 |
| Cash at bank | 3,885.0 | 3,536.6 | 4,069.2 | 4,511.6 | 4,870.7 |
| Other current assets | 2,291.8 | 2,875.0 | 1,597.8 | 1,639.4 | 2,499.2 |
| Total Assets | 29,116.0 | 28,567.4 | 27,202.8 | 27,271.4 | 27,559.6 |
| Short-term borrowings | 140.6 | 282.4 | 300.0 | 300.0 | 300.0 |
| Long-term borrowings | 12,076.0 | 11,938.4 | 12,000.0 | 12,000.0 | 12,000.0 |
| Payables | 2,792.0 | 2,925.8 | 2,774.0 | 2,937.7 | 3,156.2 |
| Other liabilities | 2,095.3 | 1,499.6 | 212.9 | 212.9 | 212.9 |
| Total Liabilities | 17,103.9 | 16,646.2 | 15,286.9 | 15,450.6 | 15,669.1 |
| Shareholders’ Equity | 12,827.5 | 11,921.2 | 12,891.2 | 12,876.2 | 13,025.9 |
| Total Equity and Liabilities | 29,116.0 | 28,567.4 | 27,202.8 | 27,271.4 | 27,559.6 |
Source: Company, PublicInvest Research estimates
PER SHARE DATA & RATIOS
| FYE Dec | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Book Value Per Share (RM) | 2.3 | 2.1 | 2.3 | 2.3 | 2.3 |
| NTA Per Share (RM) | 1.5 | 1.4 | 1.5 | 1.5 | 1.6 |
| DPS (Sen) | 15.0 | 10.0 | 10.0 | 10.0 | 10.0 |
| Payout Ratio (%) | 194.8 | 146.3 | 109.4 | 102.7 | 79.1 |
| ROA (%) | 1.2 | 1.3 | 1.9 | 2.0 | 2.6 |
| ROE (%) | 2.8 | 3.1 | 4.0 | 4.3 | 5.5 |
Source: Company, PublicInvest Research estimates
RATING CLASSIFICATION
STOCKS
SECTOR
DISCLAIMER
This document has been prepared solely for information and private circulation only. It is for distribution under such circumstances as may be permitted by applicable law. The information contained herein is prepared from data and sources believed to be reliable at the time of issue of this document. The views/opinions expressed herein are subject to change without notice and solely reflects the personal views of the analyst(s) acting in his/her capacity as employee of Public Investment Bank Berhad (“PIVB”). PIVB does not make any guarantee, representations or warranty neither expressed or implied nor accepts any responsibility or liability as to its fairness liability adequacy, completeness or correctness of any such information and opinion contained herein. No reliance upon such statement or usage by the addressee/anyone shall give rise to any claim/liability for loss of damage against PIVB, Public Bank Berhad, its affiliates and related companies, directors, officers, connected persons/employees, associates or agents.
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