| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Investment bank research indicates that a major gaming and leisure operator’s first-half 2025 financial results fell below expectations, primarily due to softer performance in key integrated resort properties and rising operational costs. The weaker-than-anticipated performance has led analysts to revise future earnings estimates downwards.
Performance Review
For the first half of 2025 (6M25), the company reported a revenue of RM13.2 billion, a 7% decline year-on-year, while core profit plummeted by 78.6% year-on-year to RM188.7 million. These results significantly lagged behind forecasts, accounting for only 26% and 19% of the investment bank’s and the street’s full-year projections, respectively. The shortfall was largely driven by lower revenue contribution from its Resorts World Sentosa (RWS) operation, attributed to the absence of the 2024 visa-driven demand, and reduced visitation to Resorts World Las Vegas (RWLV). The EBITDA margin for the period declined sharply by 5.9 percentage points to 27.6%, primarily impacted by weaker property and plantation margins. Furthermore, the second quarter of 2025 saw the EBITDA margin compress to 24.8%, a 6-percentage point drop from the previous quarter, largely due to rising cost pressures. The company did not announce a dividend for 2Q25, opting instead to reserve cash for debt settlement.
Operational Challenges and Future Outlook
Looking ahead, the gaming business is anticipated to continue facing margin compression, mainly influenced by higher operating and payroll-related expenses. Despite these challenges, management provided an update on its New York casino license application, confirming that furnishing documents requested by the regulator is underway, and a proposal has been presented to the Community Advisory Committee. A decision on the casino license is expected by December 2025. Positive developments are noted at RWLV, which has shown significant recovery since July 2025, supported by increased tourist arrivals and an expected improvement in hotel occupancy for the second half of 2025.
Analyst View and Recommendation
In response to the subdued performance and outlook, analysts at TA SECURITIES have maintained a recommendation, but adjusted their financial outlook. The firm has cut its 2025-2027E earnings estimates by 18-20% to account for a weaker EBITDA margin within the gaming and leisure segments. This revision is partially offset by an improved outlook for Genting Malaysia. The target price has been lowered to RM0.25, representing a potential upside of 25.0% from the last traded price of RM0.20. Key earnings growth is expected to stem from gaming and leisure operations, with the potential commercialization and listing of TauRx identified as a catalyst. However, the call faces risks including lower-than-expected win rates, rising operational costs, and a decline in both gaming and non-gaming revenue.
