TA Securities has reiterated its hold call on Genting Malaysia Bhd (GENM) and Berjaya Sports Toto Bhd (BJToto) with a fair value of RM2.12 from RM2.95 and RM2.38 from RM2.71 respectively. It has revised the respective discount rates higher to 17.8% from 14.4% and 12.9% from 11.4%.
However, the research house has maintained a buy call for Genting Bhd but with a lower target price of RM5.54 (vs RM6.04 previously).
“Despite the negative earnings impact, we opine that the implementation of a movement control
order is necessary to revitalise the sector’s future earnings.
“That being said, there is a risk that the order may continue beyond March, thus refraining us from upgrading stock calls even after a significant plunge in share prices recently,” it said.
TA Securities estimated leisure and hospitality revenue of RM7.5 bil for Genting Malaysia in FY20 as the closure of operations for 14 days – from today, in line with the Movement Control Order (MCO) – will result in a loss of revenue of RM287.22 mil or 3.8% of total revenue from its Malaysia operations.
For US operations, the closure of gaming facilities will result in a potential loss of RM4.2 mil revenue per day.
“Likewise, based on our estimates on BJToto’s numbers forecast operator (NFO) revenue of RM19.7 mil per draw, the potential loss of revenue could amount to RM118.2 mil or approximately 3.5% of the group’s total NFO revenue.
“Assuming that the loss of revenue will not be covered by insurance, we cut GENM, Genting Bhd and BJToto’s FY20 earnings projections by 23.5%, 8.1% and 3.9% respectively to factor in the impact of the MCO. Here, we assume that GENM’s US operations will also temporarily close for 14 days,” said the research house.
GENM and BJToto’s share prices were traded 0.14% lower at RM3.09 and 0.09% lower at RM2.09 respectively giving both a market capitalisation of RM11.98 bil and RM2.84 bil as at 4pm today. March 18, 2020
