Financial Analysis of Genting Berhad

1. Industry Overview

2. or Value
ndustry Overview
Key Industry Trends
Industry Overview
1
Company Overview
2
Financial Analysis
3
Recommendation
4
aa
Tourists Arrival & Receipts to Singapore
Genting Bhd’s key revenue contributors are from Genting Singapore and Genting Malaysia
As such, the industry overview will concentrate on Tourists Arrivals of both Singapore & Malaysia

3. or Value
ndustry Overview Industry Spending
Key Industry Trends
Industry Overview
1
Company Overview
2
Financial Analysis
3
Recommendation
4
Overall, the tourism industry is a growing industry benefitting from a
increasing middle-class segment in China, Indonesia and India
Tourists Arrival & Receipts to Malaysia

4. Company Overview

5. or Value
Company Overview
story: The Genting Group was founded in 1965 as a family holiday resort development in Genting Highlands,
laysia and has since grown into activities such as leisure, hospitality, gaming and entertainment, oil palm
ntations, power generation, oil and gas, property development, life sciences and other investments.
ographically, it has businesses in Malaysia, Singapore, the United States of America, Bahamas, the United
gdom, Egypt, China, Indonesia and India.
ategy: The Group comprises four public companies listed on the stock exchanges of Malaysia and Singapore –
mely Genting Berhad, Genting Malaysia, Genting Plantations and Genting Singapore. Over 56,000 people are
ployed worldwide and the Group has 247,400 hectares of plantation land.
luation: Genting’s share price is on a downtrend since end-2019 following the Malaysia government to
rease its tax collection on Genting.
wnership: The Lim Family, in particularly Lim Kok Thay, have control of 42.3% of Genting Bhd.
Market Cap 22,098 EBITDA (FY18) 8,13
P/E 16.2x Return on Equity 4.0
Share Price Current: RM5.70 High/Low: RM7.78/ RM5.59
Key Valuation Statistics (RM’mm)
pany Highlights Valuation & Share Performance
Industry Overview Company Overview Financial Analysis
3
Recommendation
421
Highlights
PlantationsResorts World Gentingts World Genting

6. or Value
ndustry Overview Industry Spending
Business Model
Industry Overview Company Overview Financial Analysis
3
Recommendation
421
Overarching Competitive Advantage: The monopolistic nature of Genting Malaysia and
duopolistic nature of Genting Singapore have allowed the Group to build a well-established
conglomerate by generating constant years of profit and cash flow.
ndustry Value Chain
The two key assets Genting Singapore and Genting Malaysia respectively. Genting
Singapore’s main operation focuses on an integrated resort in Sentosa whilst Genting
Malaysia operates Resorts World Genting in Malaysia. In view of the aging assets, Genting
Malaysia has embarked on a 10-year master plan in Malaysia to reinvigorate and transform
Resorts World Genting under the Genting Integrated Tourism Plan.
Another main business unit, Genting Plantations, is involved in oil-palm plantation and
continues to explore opportunities to expand through value-accretive investments for future
growth while progressively planting up areas in its existing landbank. The property division is
also under Genting Plantations to monetise the landbank and developed the Genting
Highlands Premium Outlets to complements the new and existing offerings at Resorts World
Genting as well to provide recurring income.

7. Financial Analysis

8. or Value
• For FY2018, revenue increased by 4% to RM20,853.0 million mainly due to
higher revenue (4%) in Leisure & Hospitality Division and increase in revenue
(4%) from the Plantation Division.
• The mass market performed well and further benefitted from Genting Integrate
Tourism Plan to contribute to a 22% increase in non-gaming revenue.
• Net Operating Profit Margin fell to 20.6% (2017: 26.5%) due to higher costs an
expenses from the following:
a) Higher cost at the Downstream Manufacturing segment,
b) Impairment loss of RM2,008.5 million out of which RM1,834.3 million w
due to Genting Malaysia’s investment in the promissory notes issued by th
Mashpee Wampanoag Tribe in view of the uncertainty of recovery.
• Net profit has to be further distilled to “Net Profit attributable to Equity Holders”
further determine the true earnings distributable to shareholders.
• ROE has been trending down to 4.0% in FYE2018 shows that Genting has n
been generating attractive returns to its shareholders.
Operating ForecastFinancial Highlights – Income Statement
Revenue Driversncial Highlights
mil) FYE2014 FYE2015 FYE2016 FYE2017 FYE2018
ue 18,217 18,100 18,366 20,020 20,853
profit 6,310 5,142 5,823 7,278 7,823
ofit 3,146 2,598 4,478 3,243 2,444
ofit attributable to:
y holders 1,496 1,388 2,121 1,445 1,366
s of perpetual securities 312 361 366 257 -
ontrolling interests 1,339 849 1,991 1,541 1,078
FYE2014 FYE2015 FYE2016 FYE2017 FYE2018
Profit Margin 34.6% 28.4% 31.7% 36.4% 37.5%
erating profit margin 25.5% 21.6% 34.1% 26.5% 20.6%
shareholder’s portion 5.6% 4.3% 6.2% 4.3% 4.0%
Industry Overview Company Overview Financial Analysis
2
Recommendation
431
mil) Leisure & Hospitality Plantation
Power Property Oil & Gas Others Total
Malaysia Singapore UK & Egypt US Total Oil Palm Downstream Total
ue 6,586.3 7,591.7 1,780.7 1,384.9 17,343.6 817.6 964.1 1,781.7 1,067.0 219.9 327.7 113.1 20,853.0
ed EBITDA 2,915.7 3,758.8 182.4 305.8 7,162.7 383.3 11.2 394.5 495.6 76.4 234.5 (226.6) 8,137.1
ment Analysis
esorts World Sentosa and Resorts World Genting continued to be the key drivers with RWG enjoyed an improved hold percentage in the mid to premium players segment.
esorts World Sentosa has started to be main contributor to the Group

9. or Value
• Balance sheet appeared acceptable with gearing of 0.7x.
• The current portion of Bank Borrowings due of RM4.1 billion is adequately met by cash reserves of
RM31.0 billion. Further comfort is taken by the fact that Genting is in a net-cash position.
• Future expansions include a project to develop a casino in Japan which will require fundings.
Notwithstanding, Genting is in a comfortable position to raise funds (i.e. Borrowings) for the expansion.
• The increase in the gearing ratio in 2018 was due to higher borrowings of the Group which arose mainly
from the Medium Term Notes issued by GENM Capital Berhad.
• Total proceeds from bank borrowings and issuance of Medium Term Notes in 2018 amounted to only
RM3,775.3 million. Total loans of the Group increased from RM27,179.3 million as at 31 December 2017
to RM29,224.5 million as at 31 December 2018. The increase arose mainly from the RM2.6 billion Mediu
Term Notes issued by GENM Capital Berhad in July 2018. The Group’s capital expenditure in respect of
property, plant and equipment incurred in 2018 amounted to RM4,934.5 million, mainly attributable to
development work relating to Genting Integrated Tourism Plan undertaken by Resorts World Genting and
construction work relating to Resorts World Las Vegas.
Operating ForecastFinancial Highlights – Balance Sheet
Key analysisnce Sheet
mil) FYE2017 FYE2018
rrent assets 58,848 59,574
t assets 34,760 36,568
93,609 96,141
t liabilities 8,323 10,118
rrent liabilities 28,189 28,635
es 36,512 38,753
57,101 57,388
d Total equity (less non-controlling interests) 33,788 34,274
ings
orrowings 26,969 29,225
Portion of Bank Borrowings Due 2,019 4,061
g 0.7x 0.7x
sh per share 0.82 1.22
Industry Overview Company Overview Financial Analysis
2
Recommendation
431

10. or Value
Operating ForecastFinancial Highlights – Cash Flow Statements
Review
Industry Overview Company Overview Financial Analysis
2
Recommendation
431
• Net cash generated from operating activities w
RM6,830.3 million in 2018 compared w
RM6,835.4 million in 2017.
• Net cash used in investing activities amounted
RM4,417.9 million due to higher spendings o
property, plant and equipment caused
construction of Resorts World Las Vegas on th
Las Vegas Strip in the United States of America.
• Financing activities in 2018 recorded a higher n
cash outflow of RM1,262.4 million compared w
RM175.8 million in 2017.
• Cash and cash equivalents of the Group increase
from RM29,491.9 million as at 31 December 201
to RM30,987.9 million as at 31 December 2018.

11. or Value
• Balance sheet appeared acceptable with gearing of 0.7x.
• The current portion of Bank Borrowings due of RM4.1 billion is adequately met by cash reserves of
RM31.0 billion.
•
Operating Forecast10-year data
Revenue Driversnue & EBITDA Forecast
Industry Overview Company Overview Financial Analysis
2
Recommendation
431
Segment C: (What is most impressive about this segment? How does it compare to previous periods?)
• (What is the forecasted growth rate? What is driving growth in this particular segment?)
- (What is the significance of this? How are the company’s competitors faring?)
• (What are some catalysts for this business segment? What opportunities exist?)
2015 2016 2017 2018 2019
(RM'M) 18,100.4 18,365.8 20,019.6 20,853.0 0.0
rgin 28% 32% 36% 38% #DIV/0!
M'M) 2,597.7 4,477.8 3,242.8 2,443.9 0.0
er Share 0.371 0.565 0.375 0.352 #DIV/0!
RM'M) 6,210.2 6,142.6 7,061.1 8,137.1 0.0
M'M) 39,689.3 41,152.8 33,787.9 34,273.7 0.0
4.3% 6.2% 4.3% 4.0% #DIV/0!
per share 0.04 0.13 0.21 0.22 0.00
bt (RM'M) 17,086.9 15,818.4 24,996.3 25,192.8 0.0
0.43 0.38 0.74 0.74 #DIV/0!
atio 3.75 4.05 4.18 3.61 #DIV/0!
22,986.4 24,753.4 28,166.8 29,928.6 0.0
(Cash) Per Share 1.58 2.38 0.82 1.22 #DIV/0!

12. Recommendation

13. or Value
Recommendation 1
Strategic Rationale
• (Ideally, you will want to show the accretion/dilution at different control premiums,
showcase potential synergies, and demonstrate a multiple re-rating in the market
following the acquisition)
• (How does this target company fit in with Company A’s strategy? What are some of
intangible elements like customer relationships or human capital talent that Compan
will receive in the acquisition?)
• (Why now? Timing considerations?)
Target Revenue & EBITDA Forecast
Valuation Multiples
Multiple 2018E 2019E 2020E
P/E 60.7x 64.3x 54.8x
EV/Sales 2.5x 1.1x 2.1x
EV/EBITDA 9.9x 8.9x 6.2x
EV/EBIT 10.9x 9.9x 7.2x
Company Overview
1
Team Overview
5
Industry Overview
2
Valuation
3
Transaction
Opportunities
4
riteria Yes/No
rge, prominent, and conservatively financed Yes
ng record of continuous dividend payment Yes
mit on the price , P/E <25x Yes
ne Questions to Determine if a business is a truly excellent one
Yes/No
Does the business have an identifiable consumer monopoly?
Yes
Are the earnings of the company strong and showing an upward
end? No
Is the company conservatively financed? Yes
Does the business consistently earn a high rate of return on
areholders' equity? No
Does the business get to retain its earnings? Yes
How much does the business have to spend on maintaining current
erations? Yes
Is the company free to reinvest retained earnings in new business
erations, expansions of operations, or share repurchases? How good
ob does the management do at this?
No
Is the company free to adjust price to inflation? Yes
Will the value added by retained earnings increase the market value of
e company? Yes