PublicInvest Research said today (Friday) that Genting Malaysia (GenM) could face a “cash drain” in the short term should it secure a gaming concession in Macau.
GenM is bidding in the gaming public tender through its Macau-registered affiliate company GMM Limited.
“We note that there is downside risk should GenM secure a gaming concession in Macau,” the research house said Friday, as cited by The Edge Markets.
PublicInvest explained that “although it views the Macau venture positively as it should help the group to widen its geographical presence and diversify its casino operations, the venture could also be a drain to its cash flow in the near term.”
“Also, competition in the Macau gaming industry is expected to be more intense with the presence of many established and prominent incumbent [six] concessionaires, which is a different ball game compared to Malaysia and Singapore,” it said.
According to the publication, PublicInvest Research has maintained its “outperform” rating of GenM.
The Malay research house said that for the cumulative nine months ended Sept 30, 2022, revenue and Ebitda were within expectations.
However, the report said that “core net profit came in below house expectations at 15% of the full-year number, mainly due to higher-than-expected interest cost and tax cost.”
“As a result, we revise up our interest and tax cost assumptions, leading to a 16% decline in our FY2022-24 earnings forecasts.
“Operationally, we are seeing gradual improvements following the lifting of Covid-19-related restrictions.
The report came as the Macau government scheduled a Saturday press briefing on the preliminary results of the tender.