GENTING Bhd is still regarded as a good candidate for recovery play despite such optimism not being reflected in its recent financial results.
In Kenanga Research’s view, business should pick up quickly for Genting once travelling restriction are lifted which was witnessed earlier with Genting Singapore and Genting Malaysia enjoying pent-up business volume post business resumption last year.
Genting widened its net loss to RM331.76 mil for 1Q FY2021from RM132.1 mil in the same period a year ago as all divisions recorded lower revenue with its leisure & hospitality segment being the main drag.
“Post earnings revision, our new target price is reduced to RM5.58 from RM5.93 based on five-year mean discount of 43.0% from 42.7% previously to its SOP (sums-of-part) valuation,” projected analyst Teh Kian Yeong who retained an “outperforming” rating on Genting in his results review.
“Risk to our call is a prolonged COVID-19 pandemic continuing to restrict travelling, hence affecting its casino operations.”
PublicInvest Research also maintained its “outperform” call on Genting, premised on its belief that the worst is over for the group as a complete lockdown of domestic and global economies is unlikely to recur given the vaccination programme roll-out.
However, it trimmed Genting’s FY2021-2022F earnings forecasts by 20-35% after factoring in a slower pace of recovery which is dampened by the recent resurgence of virus cases in several of its key markets.
“We roll forward our valuation to FY2022F and consequently, our SOP-based target price is revised (upward) to RM5.40 from RM5.18,” noted analyst Eltricia Foong.
Despite its bullish valuation, the research house cautioned that borders are likely to remain shut in the near term until early 2022 when the country is closer to achieving herd immunity.
This suggests that the operations of Genting’s leisure & hospitality segment should continue to run below the optimal rate in FY2021F.
As for the US$4.3 bil Genting Las Vegas (GLV) is scheduled for opening on June 24, PublicInvest Research expects the new integrated resort to remain in net loss position during the initial years of operations given the badly-affected state of the tourism and hospitality sector.
“As the post COVID-19 era is likely to see a slow build-up coupled with a potential increase in depreciation charges, we do not expect GLV to contribute positively to the group’s bottom line over the next two to three years,” added PublicInvest Research.
At 10.05am, Genting was down 4 sen or 0.81% to RM4.87 with 2.78 million shares traded, thus valuing the company at RM18.88 bil. – May 27, 2021
