Genting Group Surprises Shareholders With Dividend Despite Bad Hand Dealt By COVID-19

It was probably a nail-biting wait for the release of Genting Bhd and its subsidiary, Genting Malaysia Bhd (GENM)’s, financial result for the second quarter ended June 30 given that the Genting group’s casinos were unprecedentedly shut for more than two months globally due to COVID-19.

Both companies announced sharp losses. However, Genting group’s boss Tan Sri Lim Kok Thay has given the minority shareholders a pleasant surprise — dividends. They will be receiving the same amount of dividends as they did last year despite the current economic uncertainties.

Genting, whose net loss ballooned almost six times to RM786.06 million from the preceding quarter, declared an interim dividend of 6.5 sen per share. The group’s quarterly revenue shrank 73% to RM1.11 billion from RM4.11 billion in the preceding quarter.

Meanwhile, GENM’s net loss posted a net loss of RM900.42 million in 2QFY20, more than double the RM417.96 million in 1QFY20, while quarterly revenue fell 94% to RM114.91 million, which is the lowest in three decades, if not longer.

Still, the hilltop casino operator has declared an interim dividend of six sen per share.

Being the majority shareholder, Lim will have the biggest dividend cheque. On the back of envelope calculation, the tycoon, who hogged the limelight recently as Genting Hong Kong Ltd (GEN HK) had to temporarily suspend payments to creditors, is expected to receive RM107.64 million via his investment vehicle Kien Huat Realty Sdn Bhd.

GEN HK started to meet its creditors this week to restructure its debts as the cruise operator suffers from tight cash flow as its operation has been suspended due to the COVID-19 pandemic. It has yet to resume full operation.

At present, Kien Huat owns 43% or 1.66 billion shares in Genting, which in turn controls a 49.45% stake or 2.78 billion shares in GENM. Genting will see an inflow of dividend income of RM167.75 million from GENM.

On top of that, Lim will also be paid RM4.43 million via his direct shareholding of 1.77% in Genting, and RM1.5 million from GENM (0.44% stake).

Collectively, Lim, who is the chairman and chief executive of both Genting and GENM, is estimated to be getting RM113.56 million from both the companies.

Attractive dividend yields after share price drop

Should the duo maintain their dividend payout as last year, the two companies would be getting attractive in terms of dividend yield.

More so in the present low interest rate environment. Furthermore, the sharp drop of the share prices has boosted the yield as well.

A back-of-the-envelope calculation, assuming GENM declares a final dividend of six sen per share in the second half of FY20, the casino operator will be offering a dividend yield of 5.38% based on the closing price of RM2.23. This is in comparison to last year’s yield of 3.91% — based on its share price a year ago of RM3.07.

Likewise, at the closing price of RM3.54, Genting’s dividend yield would come at about 3.67%, if the flagship company also declares a final dividend of 6.5 sen per share. This is in comparison to a yield of 2.2% a year ago at the share price of RM5.92.

The two stocks are trading at their 11-year low if we disregard the troughs in mid-March.

GENM’s share price is still down by almost 30%, while Genting is 40% down year to date.

Source: The Edge