by HARIZAH KAMEL / pic source: gentingmalaysia.com

GENTING Malaysia Bhd (GenM) is positioned to gain from the faster than expected reopening of Resorts World Genting (RWG), though visitorship will likely remain subdued.

Hong Leong Investment Bank Bhd (HLIB) has upgraded GenM’s financial year 2021 (FY21) earnings forecast by 12% as RWG resumes operation.

Its analyst Low Jin Wu noted that GenM’s FY22 earnings remain unchanged as he believes its business should normalise to Conditional Movement Control Order (CMCO) levels in less than a month.

“The reopening of RWG was faster than anticipated. Recall that we previously assumed a two-month closure when the MCO 2.0 was first implemented on Jan 13.

“While we still expect gaming revenues to remain lacklustre at 90% lower than the CMCO period due to the interstate travel ban in place, this could be a positive leading indicator towards the reopening pace of RWG to visitors from other states due to the recent declines in Covid-19 cases,” Low said in a note yesterday.

RWG resumed operations on Tuesday with strict standard operating procedures (SOPs) in place. Some of its hotels, facilities, attractions and other offerings will be subjected to revised operating hours, limited availability or temporary closure.

“We will continue to fully adhere to the strict SOPs issued by the government throughout the resort and we seek our guests’ cooperation to do the same.

“The safety and health of all our guests and employees remain our utmost priority,” according to a notice on RWG’s website.

HLIB maintained its ‘Hold’ call for GenM with a higher target price (TP) of RM2.67 from RM2.27 previously.

“We have increased our TP to RM2.67 as we impute our higher Ebitda forecasts from our adjustments on visitorship which has increased 3% in FY21, while upgrading our earnings value/Ebitda multiple assumptions to 8.5 times from 7.5 times previously,” Low said.

He believes investor sentiment is more positive at this juncture due to a more transparent timeline on the rollout of vaccines in Malaysia, quicker reopening of the economy and lower daily Covid-19 cases reported over last week.

HLIB chooses to remain conservative on GenM as there are still ample downside risks pertaining to the proliferation of Covid-19 cases in the future as GenM’s share price has already increased by 40% since its trough in November last year.

GenM’s share price closed five sen or 1.77% lower yesterday at RM2.77, valuing the company at RM16.45 billion.