Genting valuations attract buyer interest


THE extension of the Movement control Order (MCO) did not negatively impact the shares of Genting Group as investors see value in the two Genting counters which are trading at decade lows.

Genting Bhd rose 12 sen to RM3.60 last Friday, while Genting Malaysia Bhd rose seven sen to RM1.97 as the government unveiled a RM250 billion stimulus budget to support the economy and households in general.

At closing last Friday, Genting had a market capitalisation of RM13.5 billion, while Genting Malaysia was valued at RM11.14 billion.

Rakuten Trade Sdn Bhd VP (research) Vincent Lau said the buying activities in the two Genting stocks are in line with the anticipation of the economic rescue package announced by the government last Friday.

“Although the extended MCO means another two weeks of loss income for Genting, the investors are taking advantage of the low price and think it is a bargain as they plan to hold for a longer-term.

“The investors are probably waiting for the recovery as people start to spend and go on holiday when the outbreak is over.

“Investors are also hopeful for the economic stimulus package as positive sentiment is expected to be announced,” he told The Malaysian Reserve (TMR).

Hong Leong Investment Bank Bhd (HLIB) analyst Andrew Lim said shares of Genting yesterday also reflected the positive sentiment of the global market as the US announced its US$2 trillion (RM8.66 trillion) stimulus package.

“The Genting Group managed to hold up due to the US stimulus, which was rather timely. How- ever, it did take a hit right after the MCO extension was announced and rebounded not too long after.

“Once the outbreak subsides, Genting’s theme park will be a draw factor and the following earnings will likely be stronger than pre-Covid-19,” he told TMR.

Lim said lower visitation at Genting’s theme park remains in the research house’s projection and is expected to affect the conglomerate’s earnings for financial year 2020 (FY20).

“Genting Malaysia’s FY20 earnings are expected to be affected with the closure of numerous operations in Malaysia due to the MCO, while operations in the US and the UK will be temporarily closed, until further notice.

“Given the rise of Covid-19 cases seen in both countries, we remain uncertain on the duration of the closures given the MCO extension,” Lim said in a HLIB research report last week.

Genting Malaysia announced last week that several of its resorts would remain closed until April 14 following the MCO extension as announced by Prime Minister Tan Sri Muhyiddin Yassin.

The hotel operator said the extension will affect the operation of Resorts World Genting, Resorts World Awana, Resorts World Kijal and Resorts World Langkawi, and will be resumed once the movement order is lifted.

It added that Genting Malaysia’s land-based casinos in the UK and Resorts World Birmingham are also closed temporarily as the UK government has issued a lockdown order until April 13, which will be reviewed depending on the country’s infected cases.

Lim has trimmed Genting’s earnings forecast for FY20 and FY21 by 30.7% and 0.4% respectively following the lower contributions from its subsidiaries.

HLIB maintains a ‘Buy’ call on Genting with a lower target price of RM4.80 from RM6.17, in line with an unchanged holding discount of 50% to its sum of parts-derived values of RM9.60.

“Genting has fallen alongside its listed subsidiaries whereby the share price has now almost halved year-to-date.

“By taking Genting’s market capitalisation and dividing it by the market capitalisation of its listed subsidiaries, Genting is currently trading at only 0.6 time of its effective subsidiary ownership value,” Lim said.