Genting set for cyclical recovery

Worst is over for group on potential Covid-19 vaccine, says analyst

KUALA LUMPUR: It looks like the worst is over for Genting Malaysia Bhd (Gentingm).

RHB Research is maintaining a “buy” on the company as it believes Gentingm has reached its inflection point, with almost all its facilities re-opened, boosted by encouraging business recovery.

The research unit said in its latest report that as the world moves closer to a potential Covid-19 vaccine, Gentingm is a clear beneficiary of a cyclical recovery.

“This stock is still trading at a trough valuation of 5.5 times FY21F EV/EBITDA, that is at a more than 50% discount to its regional peer average of 12 times.

“Furthermore, Gentingm’s generous dividends (5% yield) will serve as a support to the share price, and continue to reflect its sturdy balance sheet,” it said as it retained a “buy” with target price of RM2.59, with a 23% upside.

RHB Research recently visited Resorts World Genting (RWG) and the significant improvement in visitor arrivals it saw reaffirmed its positive view on the pace of recovery. The current valuation, it felt, was attractive to position for a cyclical recovery.

The gradual relaxation of social distancing rules was apparent at the casino, with three to four standing guests now allowed to place bets, in addition to seated guests.

The research house said the crowd at Skyavenue was much better compared with three months ago when it first re-opened.

Queues were seen at the cable car area, while parking spots within the building were largely occupied.

Most shops were open, with long queues at some restaurants such as Burger & Lobster and Beauty In The Pot.

At the Skytropolis indoor theme park, encouraging numbers of patrons were seen queuing up for rides.

This is a stark improvement from three months ago, when the crowd numbered less than 100.

RHB Research also said there were more guests per table at Skycasino.

Although only Genting Rewards members are allowed on the casino floor almost all the seats were taken up.

“Our site visit to RWG corroborates with management’s earlier guidance that business recovery at RWG is encouraging.

“Management previously guided that daily visitor arrivals have increased by 50% since re-opening. While it has yet to reach pre-pandemic levels due to social distancing measures, we believe that it has reached an inflection point.

“With international borders still closed, RWG will benefit from domestic tourism, as Malaysians can only travel within the country.

“We believe the pace of recovery will further accelerate with the gradual relaxation of the social distancing rules and the potential discovery of a vaccine, ” it said.

“Our site visit to RWG corroborates with management’s earlier guidance that business recovery at RWG is encouraging.” RHB Research