Genting’s speed bumps on road to recovery

According to CGS-CIMB Research, Resorts World Genting (RWG) is seeing strong pent-up anecdotal demand for local tourism and some return of foreign visitors, especially during the Singapore school holidays in June 2022.

PETALING JAYA: Genting Malaysia Bhd is roaring back to life as pent-up demand and the lifting of border restrictions see visitors returning to its hilltop casino resort. However, the group may face some speed bumps on its road to recovery due to labour shortages, said CGS-CIMB Research.

According to the research firm, Resorts World Genting (RWG) is seeing strong pent-up anecdotal demand for local tourism and some return of foreign visitors, especially during the Singapore school holidays in June 2022.

Despite strong demand, it said RWG only operated 5,500 hotel rooms (out of a total 10,500) in mid-May, although this was up from 5,200 at the end of March. CGS-CIMB Research said it believes this would have likely improved further to about 6,000 in June.

“RWG is in the process of hiring more staff and plans to open more rooms over the next six months.”

To factor in the slower RWG recovery, CGS-CIMB Research has cut the group’s financial year 2022 (FY22) core earnings per share by 52% and anticipates a full recovery in FY23.

Meanwhile, the soft-opening promotion of the SkyWorlds theme park has been extended from the end of June to Sept 30, 2022 as the gaming group seeks to attract more traffic.

“Currently, it is operating 15 out of a total 19 rides, with three more new rides to be opened before the end of the year,” said CGS-CIMB Research.

“However, online checks show mixed feedback, with visitor complaints mostly about the intermittent closure of some rides due to technical issues,” it added.

CGS-CIMB Research believes these are teething issues and operational kinks are to be ironed out.

The net debt of Genting Malaysia, which is 49.5% controlled by Genting Bhd, stood at RM9bil at the end of first quarter 2022.

On another matter, Genting Singapore Ltd said it was informed that parent company Genting had received an unsolicited approach for its stake in the former, and which has not been pursued.

Last week, Bloomberg reported that multiple suitors, including MGM Resorts International have approached Genting to buy its 53% shareholding in Genting Singapore. The news, according to Maybank Investment Bank (Maybank IB) Research, reiterated its view that Genting is deep in value.

Maybank IB Research said there are reasons for and against Genting acquiescing.

Divesting the Singapore gaming arm would also render Genting dependent on RWG, which operates in increasingly conservative Malaysia for earnings, added Maybank IB.

It also noted that the larger Genting Group has a history of selling assets. Genting Hong Kong sold Norwegian Cruises Lines progressively from 2013 to 2018, raising more than US$1bil (RM4.45bil).

The financial viability of Genting Singapore investing S$4.5bil (RM14.32bil) in RWS 2.0 is also questionable given the prospect of a global recession and the threat of Thailand legalising integrated resorts.

Lastly, it noted that Genting has some RM16bil to RM17bil of holding company’s net debt due to Resorts World Las Vegas, which could be eased by selling its 53% shareholding in Genting Singapore.