KUALA LUMPUR: Genting Malaysia Bhd may miss earnings expectation in its fourth quarter results, prompting RHB Research to cut its forecast on parent Genting Bhd’s profit by 1.6 per cent this year.
RHB Research also cut Genting’s earnings for financial years 2020 and 2021 by four per cent and 0.3 per cent respectively.
“Potential weaker-than-expected upcoming Genting Malaysia’s 4Q19 results and the recent Wuhan coronavirus outbreak prompt us to cut (Genting’s) FY19F-21 earnings,” the firm said in a report today.
RHB Research said upside for Genting remained capped until the outbreak stabilised and public fears were allayed in Malaysia and Singapore.
“We still like Genting as a cheaper proxy for Japan casino play and its deep value proposition, trading at an undemanding 4.6x enterprise value/earnings before interest, taxation, depreciation and amortisation (EV/Ebitda) versus regional peer average of 11x.”
It expects Genting’s FY19 Ebitda could range between RM7.5 billion and RM7.8 billion.
RHB Research also expects some downside to its forecasted share of loss from Empire Resorts of RM38 million in 4Q19 due to a possible one-off staff severance cost following the integration with Genting Malaysia’s New York team.
The firm noted that the coronavirus outbreak had led Resort World Genting to announce that all tour bookings from China had been cancelled for February.
“Similarly, Singapore has stepped up its border control measures by barring entry to all Chinese visitors and foreigners with a recent history of travel to China. It also raised the Disease Outbreak Response System Condition (DORSCON) alert level from Yellow to Orange given the heightened risk to public health.”
Chinese form the largest group of visitors in Singapore (about 18 per cent) and this should negatively affect Resorts World Sentosa.