Genting is poised to benefit from easing of travelling restrictions
A report from Kenanga Research expecting gaming companies’ earnings to recover from the washed-out second quarter (Q2) of 2020, states that the Malaysian gaming sector is poised to benefit from easing of travelling restrictions with Covid-19 vaccines expected to be rolled out soon, adding that, “Sector valuation remained attractive as gaming stocks were still 15-26 per cent cheaper than a year ago.”
Overall, casino players, which were badly hit, are expected to lead a swift earnings rebound as opposed to number forecast operators (NFOs) for which ticket sales are currently at 80-85 per cent of pre-Movement Control Order levels. “We believe the gaming players, especially the casino operators will benefit from eventual borders reopening as well as vaccine rollout in 2021, as earnings will recover swiftly,” added Kenanga Research.
Genting Malaysia Bhd expects to see strong local casino revenue with the opening of its outdoor theme park attracting tourists, while parent Genting Bhd should benefit from the strong Genting Singapore numbers which was fairly sustainable. Also, Genting and Genting Malaysia have seen their casinos across all geographical locations experiencing pent-up demand from the re-opening in the third quarter of financial year 2020 after the washed-out MCO-affected quarter in Q2.
Other gaming analysts are more upbeat about the prospects for Malaysia’s gambling operators, despite a recent upswing in new Covid-19 cases. In a research note on the outlook for 2021, Nomura said it expects Genting Malaysia’s Resorts World Genting, “to stage a gradual recovery over coming quarters with a sharp inflection from 2022 with the opening of its new outdoor theme park.”
The Genting Highlands resort reopened in June and in Q3, revenue was already at 66 percent and EBITDA 79 percent of prior year levels. “This demonstrates local demand resilience as movement curbs were lifted in 3Q20 (70 percent of Malaysian revenue historically has come from locals), and the effect of cost rationalization undertaken by the group. While visitation dipped after October movement curbs, it rebounded towards year-end holidays again,” added Nomura
Nomura rates Genting Malaysia a “buy” and sees 24 percent upside for the stock this year, as the opening of the long-delayed theme park is seen as a key to driving visitation to the resort and was the crowning glory in the 10-year Genting Integrated Tourism Plan, which began in 2013.
