Genting Malaysia Berhad (GENM) has delivered 2Q24 results that align with expectations, despite facing challenges such as the recent increase in the Sales & Service Tax (SST). The company's core net profit for the quarter totalled RM106.1 million, reflecting a 12% year-on-year decline and a 56% quarter-on-quarter decrease. This brings the 6-month net profit to RM344.5 million, a 111% increase from the previous year, and represents 48% of the full-year estimate. The 6-month EBITDA of RM1.54 billion was also in line with expectations, accounting for 49% of the full-year forecast.

Maybank Stock Broking House have maintained a BUY call for GENM, with a discounted cash flow (DCF) target price of RM3.09. This recommendation is supported by the company's strong earnings recovery and the potential future impact of Resorts World New York City's bid for a full casino licence. The potential licence could add at least RM0.50 to the current DCF target price.

The impact of the SST hike, which increased from 6% to 8%, has been manageable for GENM. The core net profit decline in 2Q24 was primarily due to the exceptional performance in 1Q24, which benefited from lower-than-expected tax rates and Genting Integrated Tourism Plan tax incentives. Despite the SST hike, Resorts World Genting's EBITDA margin has only been slightly compressed by 1 percentage point to 32.5%, and the overall EBITDA declined modestly by 6% quarter-on-quarter.

Looking ahead, GENM is expected to see stronger earnings in the second half of 2024, as seasonality typically boosts performance. The reopening of the Circus Palace and Hollywood mass gaming floors, currently under renovation, is anticipated in December 2024 to capitalise on the year-end holidays. Furthermore, GENM is poised to resume its bid for a full casino licence at Resorts World New York City by mid-next year, with results expected by the end of the year.

Source: Maybank
Title: Slight pause after stellar 1Q24