Genting set to be on a winning streak

Resorts World Las Vegas is shown under construction Monday, April 19, 2021, in Las Vegas. Owners have announced a June 24, 2021, opening date after more than seven years of planning and building. The $4.3 billion complex by Malaysia-based Genting Group has been under construction since May 2015. It has more than 3,500 rooms at three Hilton-branded hotels.- AP

KUALA LUMPUR: With Resorts World Las Vegas (RWLV) scheduled to officially open its doors on June 24, things are looking up for Genting Bhd in the long run.

RWLV will be the first new integrated resort on the Las Vegas Strip in more than 10 years and will feature, among others, 3,500 guest rooms and suites, 117,000 sq ft of gaming floor space and a 5,000-capacity theatre.

Analysts are notably positive on the new addition to the group.

While the Las Vegas Strip is a competitive space, RHB Research opined that it is still a profitable location to be in.

“It has a total of 60 unrestricted gaming licenses. Total revenue of the Las Vegas Strip – prior to the Covid-19-struck 2020 – has been growing at a steady 10-year compounded annual growth rate of 3% to reach US$18.5bil (RM75.85bil) in 2019, ” it said in a report.

Some notable future projects, such as the Las Vegas Convention Centre’s expansion, a new 18,000 seat music arena at the Venetian, the Allegiant Stadium and the Vegas Loop, could also lead to higher footfalls for RWLV.

The group has also partnered with Hilton to bring in three of the latter’s premium brands.

This could help RWLV accelerate its occupancy rate and attract visitors by tapping into Hilton’s existing customer base and expertise in managing hotels.

While RHB expects losses at the resort in the initial years, it noted that Genting’s track record in managing integrated resorts should turn RWLV into a profitable venture after financial year ending

Dec 31,2023 (FY23).

“After examining its peers’ performances, we expect negative ebitda (earnings before interest, tax, depreciation and amortisation) in FY21, as it will take time for RWLV to ramp up its business volumes.

The revenue split between gaming and non-gaming is likely to be 35:65, which is in line with the Las Vegas Strip’s revenue split.

“Nevertheless, RWLV should be able to achieve positive ebitda by FY22, given the steepening of the vaccination curve and Genting’s proven track record in managing integrated resorts globally, ” the research house said.

At net profit level, RHB only expects it to be positive from FY24, adding that its operating cash flow should be sufficient to cover its interest expenses and capex requirements going forward.

Although it cut Genting’s FY21-23 earnings forecasts by 52.3%-4.6%, the brokerage upgraded its target price on the stock to RM6.86. RHB maintained its “buy” call on Genting for its attractive valuation and as a clear beneficiary of an eventual cyclical recovery.

Meanwhile, its subsidiary Genting Malaysia Bhd (GenM) is also set to benefit from a new opening this year.

Resorts World Genting’s new outdoor theme park Genting SkyWorlds is expected to welcome visitors by the middle of the year.

“History suggests that GenM’s share price will rally pre-opening of Genting SkyWorlds, ” said Maybank IB Research in a report.

Maybank IB added that other positive factors for GenM include the potential for Resorts World New York City (RWNYC) to be awarded a lucrative downstate commercial casino license and the possibility of the Mashpee Wampanoag (MW) promissory notes being written back.

Nonetheless, the recent surge in new Covid-19 cases locally has prompted Maybank IB to change its forecast for GenM.

Still, the research house believes that its earnings recovery momentum remains intact.

Maybank IB kept its “buy” rating on GenM with a raised target price of RM3.43.

But should RWNYC be converted into a downstate commercial casino and GenM write back its MW promissory notes, the research house said a further “blue sky” target price of RM4.30 is achievable.

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