10 things I learned from the 2021 Genting Malaysia AGM

Incorporated in 1980 and listed on Bursa Malaysia in 1989, Genting Malaysia Berhad owns and operates resort properties across the globe including Resorts World Genting in Malaysia, Resorts World Casino New York City in the U.S., Resorts World Birmingham in the U.K., and Resorts World Bimini in Bahamas.

Just like how airline stocks and hospitality businesses took a beating amid the pandemic, Genting Malaysia was not spared from the impact.

Here are 10 things I learned from the 2021 Genting Malaysia AGM.

1. Revenue was down 56.5% year-on-year to RM4.5 billion in 2020 because of the unprecedented challenges brought on by the pandemic and the subsequent intermittent lockdowns. The company recorded net loss of RM2.3 billion during the year compared to RM1.4 billion net profit in 2019. DPS was down from 20 sen in 2019 to 14.5 sen in 2020. Dividend yield stood at 5.4% in 2020.

2. Minority Shareholder Watch Group pointed out that the remunerations of deputy chairman Tan Sri Lim Kok Thay and deputy chief executive Lim Keong Hui were down by 26.8% and up by 0.8% year-on-year respectively in 2020 although the company posted a net loss. Chief financial officer Koh Poy Yong responded that a portion of the remunerations comprising bonuses and long-term incentive plans were earned prior to 2020 but paid in 2020. She highlighted that all executive directors and senior management took a 20% voluntary pay cut in 2020 and 2021. Notably, Tan Sri Lim Kok Thay remained as the highest paid executive in Malaysia’s corporate world in 2019 and 2020.

3. Revenue in the first half of 2021 contracted 30.4% to RM1.4 billion year-on-year. There were some early signs of economic revival as vaccination rates increased and movement restrictions were eased in countries where the company operates. Most of its casinos have since reopened. In Malaysia, domestic tourists flocked to Genting Highlands and caused traffic jams on the way up there after interstate travel was allowed.

4. To cope with the lockdowns and uncertain revenue for prolonged periods, president and COO Dato’ Sri Lee Choong Yan shared that the company embarked on a two-pronged strategy of preserving the company’s cash flow and strengthening its balance sheet. Approximately 6,500 employees were retrenched, while executive directors and senior management took voluntary pay reductions.Redundancy costs amounting to RM146.6 million were incurred in 2020 which caused the spike in ‘Other expenses’ from RM244.5 million in 2019 to RM323.5 million in 2020. The management also deferred non-essential capital expenditure and significantly reduced discretionary expenses to contain costs.

Secondly, Genting Malaysia had to rely on its brand name to raise money when its casinos were closed. It raised approximately USD2.4 billion in Malaysia and the U.S. via bonds and credit facilities. The existing debt that was refinanced currently bears a lower interest rate because of the low-interest-rate environment. The company also sold some of its non-core assets in the UK to pare down its borrowings. Impairment amounting to RM590.7 million relating to the assets of Resorts World Birmingham, Resorts World Bimini, and certain casino licences and assets in the UK was incurred in 2020 due to disruptions to its business activities.

5. To comply with the relevant standard operating procedures set forth by the government, Resorts World Genting has operated at reduced capacity. The monthly cash burn rate was about RM4 million a day when the resort was still closed. In mitigation, they received RM800,000 per month from the government in electricity discounts since April 2020, and RM900,000 monthly in wage subsidies between June and December 2021. On the other hand, the annual maintenance cost of superyacht Tranquility averages at about EUR2.2 million (equivalent to RM10.6 million or USD2.5 million).

6. Rental assistance totalling RM38.6 million was offered to tenants of SkyAvenue Complex (shopping area) due to temporary closures. Consequently, the occupancy rate of the complex has remained high at around 90%. Hotel room occupancy at Resorts World Genting declined from 95% in 2019 to 50% in 2020 while the number of visitors dropped from 28.7 million to 12.7 million over the same period.

7. The company cooperates with the authorities in Malaysia to combat illegal online gambling activities (that use Genting’s name), and to promote Resorts World Genting as an integrated resort to domestic tourists. Genting SkyWorlds, the RM3.2 billion outdoor theme park at Resorts World Genting is targeted to open in the fourth quarter of 2021 after several delays and will be a growth catalyst to attract more visitors. The company will focus on domestic tourism packages as the national border remains closed. In the mid term, the theme park will be marketed to regional tourists and to drive footfall to the hilltop integrated resort.

8. The president and COO responded to an institutional investor that the company will continue to expand its U.S. presence. The impairment on the company’s RM1.8 billion investment in the Mashpee Wampanoag tribe will be reversed if the U.S. Department of Interior recognises the tribal status and protects the tribe’s development rights on their reserve trust lands by issuing a new declaration.

9. The company owns three resorts in New York, namely Resorts World Catskills, Resorts World Casino New York City, and Resorts World Hudson Valley. Resorts World Catskills has incurred losses over the past few years because of high overheads, listing and compliance costs, and interest costs, but has been EBITDA-positive since May 2021. The management has adopted a leaner organisational structure since the associate was privatised. The investment was seen as a stepping stone for an online sports betting licence; Genting Malaysia recently achieved this by forming a consortium with its rival casino operators. The move will provide secondary income to the company and further mitigate risks associated with conducting business with its physical assets amid the pandemic. Resorts World Catskills owns a full-scale gaming licence (including table games and slot machines).

At Resorts World Casino New York City, the company opened a new hotel with 400 rooms, namely Hyatt Regency JFK. This casino currently only offers slot machines. The two resorts are managed by the same management team to boost operational synergies and grow the company’s presence in the New York state gaming market.

Resorts World Hudson Valley is an upcoming project in Orange County. The total construction costs are estimated to exceed RM30 million. The project will boast thousands of slot machines and is slated to open in early 2022.

10. The company has proposed to build an elevated rail system in Miami, Florida to connect downtown Miami to South beach via a consortium. The proposed transportation hub will feature a planned casino at the transit station and a connection to the existing Metromover rail system at downtown Miami. A feasibility study of the system is being conducted. The proposed rail will benefit the company as traffic is drawn to its casino. At Resorts World Bimini, the company partners with cruise operators to boost business for the resort.

The fifth perspective

Our life is slowly returning to what it was before COVID-19, and so is Genting Malaysia’s business. However, the company’s share price has already rebounded to pre-pandemic levels from its bottom in March 2020. Given that its business is relatively cyclical, I will probably adopt a wait-and-see approach for now.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Shak Chee Hoi

Chee Hoi is an investor and research analyst at The Fifth Person. He was previously involved in wildlife conservation work with a non-governmental organisation as well as sustainability consultancy work. He personally believes in impacting society and the environment for the greater good.

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