GENTING Malaysia Bhd (GENM) through its Resorts World New York City (RWNYC) stands a good chance to win a full casino licence which is capable of adding 13%-15% to its target price.
CGS-CIMB Research based such bullish outlook on the FY2023 New York State budget (approved on April 9) which includes the award of up to three downstate full casino licences potentially by year-end/early-2023 for at least US$500 mil each.
“As an existing site, we believe RWNYC may have an edge as it will be able to quickly generate more gaming taxes/create new jobs for the state (vs three to four years for a new casino resort), and it already has community support/siting approvals,” opined analysts Foong Choong Chen and Sherman Lam Hsien Jin in a company update.
“If it wins, we see extra net profit of RM274 mil from RWNYC in FY2026F (higher in FY2023-2025F before a third casino opens), thus enhancing GENM’s equity fair value by 44-51 sen/share.”
As per the New York State Gaming Commission, RWNYC’s 1Q 2022 gross gaming revenue rose 18% year-on-year (yoy) (-2% quarter-on-quarter) and is now a mere 3% shy of 1Q 2019’s.
“We think occupancy rate (4Q 2021: 37%) at its new Hyatt Regency hotel (opened in August 2021) will rise in FY2022F as passenger traffic at the JFK International Airport (4km away) recovers further (up 2.2 times yoy in February but still below February 2019’s by 26%),” projected CGS-CIMB Research.
In view of the bright prospect, the research house has reiterated its “add” rating on GENM with an unchanged sum-of-parts (SOP)-based target price of RM3.40. Its re-rating catalysts include FY2022F earnings recovery and RWNYC winning a full casino licence while the downside risk is further COVID-19-led resort closures.
Back home, CGS-CIMB Research observed that visitors to GENM’s Resorts World Genting’s (RWG) SkyWorlds Theme Park have been slower than expected since its soft opening on Feb 8.
“We think this will improve in 2H 2022F due to the opening of more rides (only 75% open now), pent-up demand as COVID-19 worries abate (April 12’s new cases are 73% off the March 5 peak) and promotional campaigns,” reckoned the research house.
“We have assumed 1.5 million/2.3 million/2.5 million SkyWorlds visitors in FY2022F/2023F/2024F (3.1 million visited the old outdoor theme park in FY2012). Including spill-over benefits on other RWG facilities, we see a net negative hit of RM174 mil/58 mil to GENM’s pre-tax profit in FY2022F/2023F and accretion from FY2025F onwards.”
At 10.52am, GENM was unchanged at RM2.97 with 1.36 million shares traded, thus valuing the company at RM17.64 bil. – April 14, 2022
