UPBEAT with prospects of Resorts World Las Vegas (RWLV) even as the COVID-19 pandemic remains on the prowl in the Las Vegas Strip – and the eventual re-opening of the Malaysian economy – CGS-CIMB Research has made a 7% upward revision of Genting Bhd’s SOP (sums-of-part)-based target price to RM7.35.
The research house has a positive initial impression of RMLV which commenced its commercial operations on June 24 given “it looks well-designed, with some fresh retail and F&B concepts (vs older Las Vegas Strip properties)”.
“We observed that RWLV has received decent crowds and generally positive reviews in its first 1.5 months of operations,” noted analysts Foong Choong Chen and Sherman Lam Hsien Jin in a recent company update.
“RWLV’s opening is also timely as businesses in Nevada have been allowed to operate at full capacity from June 1. Plus, the Strip’s gross gaming revenue (GGR) was back to pre-pandemic levels or higher in April-June due to pent-up demand.”
While the research house’s initial projections are for RWLV to make net losses of US$47 mil/55 mil/11 mil in FY2021F/2022F/2023F, CGS-CIMB Research sees equity value accretion of 59 sen per Genting share (both of which not included in its earnings forecast and valuation).
“(Nevertheless), COVID-19 remains a potential near-term risk to the Strip recovery and RWLV as cases have spiked in July-August with Nevada having re-issued mask mandates for indoor public spaces from July 30,” cautioned CGS-CIMB Research.
Back home, the research house widened its FY 2021F core net loss for Genting’s listed unit Genting Malaysia Bhd (GENM) by 64% to RM1.39 bil (FY2020: -RM1.26 bil) to factor in the potential closure of Resorts World Genting (RWG) from June 1 to mid-November 2021 under the full movement control order (FMCO).
“We conservatively assume that RWG will reopen in Phase 4 of the FMCO when economic sectors and inter-state travel/domestic tourism resume,” projected the research house.
“We also cut our FY2022F core EPS for Genting Malaysia by 15% assuming RWG’s business remains at 10-20% below pre-COVID levels in 1H 2022F with full recovery in 2H 2022F.”
On the same note, CGS-CIMB Research also slashed its FY2021F/2022F core EPS for Genting by 82%/6% to reflect Genting Malaysia’s earnings cut.
Post-revision, it sees Genting rebounding to a small core net profit of RM58 mil in FY2021F before recovering to a more significant 25 times/16.3% year-on-year (yoy) in FY2022F/2023F as negative effects from COVID-19 subside.
“We now see DPS (dividend per share) back at 22 sen (pre-COVID level) only in FY2023F,” added the research house.
At the close of today’s mid-day trading, Genting was up 4 sen or 0.84% to RM4.79 with 1.96 million shares traded, thus valuing the company at RM18.57 bil. – Aug 17, 2021
