GENTING Malaysia Bhd (GenM) is expected to break even or chalk up a small profit in its upcoming 4Q FY2021 results which marks a sharp improvement from a core net loss of RM303 mil in 3Q FY2021 following a full quarter impact of the total lockdown (MCO 3.0) measure.
As Malaysia is unlikely to re-impose strict lockdown in the future, PublicInvest Research expects the casino-cum-resort operator to see a gradual uptick in business volume at its Resorts World Genting (RWG) in FY2022F, driven mostly by local tourists.
“We believe the key catalyst for GenM is the re-opening of international borders,” opined analyst Eltricia Foong in a company update.
“Although this may not likely take place anytime soon given the spike in new COVID-19 cases globally, we believe the eventual re-opening of international borders is undeniable when new variants become less virulent.”
Against such backdrop, PublicInvest Research upgraded GenM to “outperform” (from “neutral” previously) with an unchanged target price of RM3.25.
Moving forward, PublicInvest Research observed that the severity of illness caused by COVID-19 infection has declined which could be a function of higher vaccination rates and natural evolution of virus.
“Hence, we believe the worst is behind us and anticipate limited earnings downside risk from here as far as COVID-19 impact is concerned,” the research house pointed out.
After multiple delays, the US$800 mil Genting SkyWorlds’ outdoor theme park has finally been scheduled to open its doors to the public next month at the height of the peak season during the Chinese New Year festival.
Even with international borders likely to remain shut – at least over the next six month – PublicInvest Research expects visitor arrivals to increase to 23 mil and 27 mil people in FY2022F and FY2023F respectively, recovering from a low of 12.7 mil in FY2020. Prior to the pandemic, RWG’s visitor arrivals hit 29 mil people in FY2019.
Elsewhere, PublicInvest Research does not expect any major ramification from the liquidation of Genting Hong Kong on GenM given there was no cross shareholdings except for Tan Sri Lim Kok Thay (GenM’s deputy chairman/chief executive) being a common shareholder.
“Also, based on its most recent annual report, it appears that there are no GenM shares pledged by the holding company as collateral though 14.8% or 570 million Genting Bhd (GenM’s parent company) shares have been pledged for financing,” justified the research house.
At 9.37am, GenM was up 2 sen or 0.73% to RM2.75 with 221,800 shares traded, thus valuing the company at RM16.33 bil. – Jan 28, 2022
