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PublicInvest sees Genting Malaysia earnings returning to normalcy in FY22

KUALA LUMPUR (June 18): Trading interest in shares in Genting Malaysia Bhd (GenM) spiked after it announced that its Resorts World Genting (RWG) will resume operations tomorrow, and analysts are positive on this.

However, PublicInvest Research said it does not expect the crowd size or business volume to return to normalcy in the near future, and anticipates earnings to only go back to pre-Covid-19 levels in the financial year ending Dec 31, 2022 (FY22). 

On the other hand, the research firm projects a strong recovery to happen in FY21 from a net loss in FY20.

GenM shares traded one sen or 0.73% lower at RM2.72 at 10.48am, valuing it at RM16.15 billion. Some 29.53 million shares were done, surpassing its 200-day average volume of 14.45 million.

Genting Bhd, on the other hand, was up 30 sen or 0.67% at RM4.53, giving it a market capitalisation of RM17.34 billion. Some 14.6 million shares were traded.

“Given these restrictions and possibly the change in consumer behaviour due to fear of contracting the virus, we believe RWG is unlikely to operate at its optimal level until a vaccine is found, which could be at least a year away, according to scientists,” said PublicInvest in a note today.

In view of the anticipated drop in business volume, the group is reported to be cutting 3,000 jobs, representing about 15% of its total workforce, it added.

Similar to its peers in the region, stringent social distancing guidelines will be put in place for all casino and theme park operations at RWG, said PublicInvest.

“Crowd control is necessary in order to avoid the risk of contraction and transmission, which means operations will not be running at the optimal level until a vaccine against Covid-19 is available,” PublicInvest added.

Some of the key restrictions include entry to SkyCasino and Genting Club being limited to Genting Rewards members only, while public entry is not allowed at this juncture.

High-tech systems will be used to monitor the number of guests in the casino and ensure it is not overcrowded, with only a limited number of players expected in each table game. For slot and electronic table games (ETG), only alternate machines will be operating, said PublicInvest.

Meanwhile, following rounds of hiccups, the date of completion and operations of its outdoor theme park remains unclear, although management had guided it will open by end-2021, said PublicInvest Research.

“We believe GenM will continue to incur costs in maintaining the theme park, although it is not in operations yet,” said the research house, noting that it reiterated a "trading sell" call on GenM with a target price of RM2. This implies a discount of 26.47% from its current share price.

Elsewhere, retail shopping outlets at Resorts World Birmingham (RWB) in the UK reopened on Monday, though all other offerings at RWB, UK land-based casinos, Resorts World Casino New York City (RWNYC) and Resorts World Catskills (RWC) remain temporarily closed.

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