GENM Q3 2019

1. Genm's revenue increased by 7% to RM7.9 billion with both Malaysia and US increased 12% and 6% respectively while UK revenue dropped by 7% 
• Malaysia -  the overall business volume from gaming segment declined in YTD Sept 2019 due to reduction in incentives offered to the players. The non-gaming segment revenue has increased by 36%.
• US & Bahamas - due to the strengthening of USD against RM. Excluding this impact, revenue would have increased by 2% mainly due to higher volume of business from RWNYC operations.
• UK & Egypt - due to lower hold percentage from its premium gaming segment in UK and lower revenue from Cairo, Egypt.
2. However its EBITA dropped by 2% mainly dragged by businesses in Malaysia due to higher casino duty. However if you look at its EBITA margin as compared to 2017 & 2018, the EBITA margin actually maintains.
3. There is a disposal gain of RM123 million from the disposal of a subsidiary in UK.
4. Lower interest income received in 2019 is due to impairment of the Group’s investment in the promissory notes issued by the Tribe in 2018.
5. Finance cost increased by RM76 million due to lower qualifying assets eligible for interest capitalisation during the period and there is an increase in bank borrowings.

1. Cash at bank reduced 11.2% and bank borrowings increased 1.9% (Its gearing ratio increased to 16% from 9%.) 

1. The management mentioned that the outlook for gaming business remain challenging. 
2. Outdoor theme park expected to open on time which is Q3 2020. 
3. Genm acquire LeoVegas Mobile Gaming Group's subsidiary Authentic Gaming for RM70 million to strengthen its footprint for online gambling in UK. 
4. Resort world NYC is still under expansion to maintain its market leader position in northeast US region. Starting 2020, RW catskill will start to contribute its revenue and losses. 

Comments: 

1. Overall speaking, Genm has reported a higher revenue with a stagnant profit which is considered as good (However its EBITA margin remain competitive which its there is no issue with its core operation).
2. However its gearing ratio increase from 15% from the previous quarter to 16% this quarter. Genm has a series of acquisition on UK Authentic Gaming and US Empire Resort which might prevent it from giving special dividend this year (This is the risk).
3. At current price of RM3.11 its PE is only 12.60. With PE 18, its share price will be RM4.44. If there is no special dividend, at RM3.11 a share, a dividend payout of 11 sen will be 3.5%.