GENTING Hong Kong Ltd is unlikely to pose a key threat to Genting Malaysia Bhd (GenM) as much as the slowdown in COVID-19 recovery, change in luck factor and regulatory risks, according to RHB Research.
“On Genting HK’s recent announcement on potential cross defaults of US$2.8 bil, we opine that it will unlikely affect GenM as it does not have any holdings in Genting HK,” justified analysts Lee Meng Horng nad Loo Tungwye in a company update.
“(Moreover), its minority shareholders are likely to reject any potential proposal that is related to the bailing out of Genting HK.”
Instead, RHB Research is bullish over GenM’s prospects, buoyed by news flow that Southeast Asia’s most anticipated theme park will finally open its doors on Feb 8.
“Genting SkyWorlds will accelerate GenM’s business recovery trend as it should be a crowd puller and provide a new income stream while also benefitting other facilities within Resorts World Genting (RWG),” projected RHB Research. “We continue to like the stock as a direct beneficiary of tourism recovery play.”
Reiterating its “buy” call with an unchanged target price of RM3.58, the research house anticipates RWG’s overall business recovery in its 4Q FY2021 to be strong despite some slight disruption from the December 2021 landslide.
Moreover, December 2021 gross gaming revenue (GGR) recorded from Resorts World New York City (RWNYC) and Resorts World Catskills (RWC) stood well despite the Omicron COVID-19 variant – at circa 90-95% of pre-pandemic levels, according to RHB Research.
On the launch of mobile sports betting platforms in New York by some operators since Jan 8, the research house said the state is on track to set a new record for the highest monthly mobile sports betting money wagered among all states in the US.
“Given the strong interest seen, Empire Resorts (ER) will benefit greatly once it launches its own platform,” reckoned RHB Research.
Elaborating on its “buy” stance, RHB Research noted that GenM is a direct proxy for investors to ride on the tourism recovery angle play.
“The imminent opening of Genting SkyWorlds will create excitement among visitors, and can potentially lead to higher footfall to RWG,” the research house pointed out. “Valuation is inexpensive at 7.3 times FY2022F EV (enterprise value)/EBITDA (earnings before interest, taxes, depreciation, and amortisation) compared to regional peer average of circa 13 times.”
RHB Research added that further upside could come from ER’s ongoing turnaround, especially when New York state mobile sportsbook’s GGR is showing promising growth week-on-week.
At 10.10am, Genting Malaysia was up 1 sen or 0.36% to RM2.80 with 1.24 million shares traded, thus valuing the company at RM16.63 bil. – Feb 4, 2022
