PETALING JAYA: The reopening of Resorts World Genting (RWG) last week will sustain Genting Malaysia Bhd’s (GeNM) present valuations, despite a deliberate slow ramp-up.
UOB Kay Hian Malaysia Research remains confident in GeNM’s ability to regain most of its pre-movement control order (MCO) revenue by the second quarter of 2021 when its outdoor theme park opens.
Coupled with a high prospective dividend yield of 6%, this signifies highly favourable risk-reward dynamics.
Hence, the research firm has maintained its buy call with a higher target price of RM3.10 from RM2.89 previously.
At RM3.10, this implies a valuation of 7.8 times 2021 enterprise value/Ebitda.
Last week, Genting received the green light to recommence operations.
In Malaysia, RWG’s operations (except for the indoor theme park) have resumed.
Resorts World Birmingham in the United Kingdom has reopened its retail shopping outlets, with land-based casinos remaining closed.
In the United States, Resorts World New York at Catskills remains temporarily shuttered, but is preparing to reopen soon.
UOB Kay Hian Malaysia Research said that RWG’s ground survey indicates modest foot traffic.
“We observed that the hotels, cable car service, F&B and retail outlets are back in business with comprehensive safety measures, although not all the hotels and gaming floors have been opened.
“However, the gaming capacity is naturally much lower versus pre-MCO times due to strict safe distancing requirements.
“Moving forward, we expect a gradual recovery of domestic trippers, factoring in the fact that local Covid-19 cases are well under control, while overseas travel is still banned with international travel impediments, ” said UOB Kay Hian Malaysia Research.
It pointed out that RWG has one of the steepest recovery among regional peers.
“RWG is among one of the earliest to recommence casino operations, as most regional competitors in Macau, Cambodia, Philippines and Singapore are still closed.
“As local trippers accounted for about 70% of Genting Highland’s patronage, GenM’s recovery should be relatively steeper than its regional peers as most countries are still under lockdown and international flights are still suspended, ” said the research firm.
It opined that the resumption of Malaysian operations should result in modest profitability and be supportive of generous dividends.
Although not all of RWG’s gaming facilities have been reopened and the indoor theme park remains closed, it gauged that the current level of business activities should be modestly profitable, considering its reduced cost base after a major rationalisation exercise.
“We maintain our view that GeNM would still be in a position to dole out significant dividends (although back-ended) in 2020, ” said UOB Kay Hian Malaysia Research.
However, it noted that gaming capacity has been largely reduced.
While RWG has reopened, not all its gaming facilities are re-opened, and entry to Sky Casino and Genting Club is only limited to Genting Reward members.
“Over the weekend, we observed that a lot of visitors were seated in the waiting area for registration, and gamers formed a long queue to enter the premium mass section.
“In the gaming floor, every table game allows seating capacities of only two to three seats, and players standing behind the lines are prohibited from placing bets.
“During peak hours before MCO, gaming tables had a capacity of up to 15 to 20 players, including standing players and stacking bets.”
Meanwhile, non-gaming facilities that are partially re-opened, need more time to recover.
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