The action could see the firm suffering losses, but its earnings recovery momentum is intact, says research house

by LYDIA NATHAN / Pic by AFP

GENTING Malaysia Bhd’s (GENM) theme park, Resorts World Genting (RWG), has been shut for the third time due to the lockdown, and may only reopen in December 2021.

Maybank Investment Bank Bhd (Maybank IB) said the action could see the company suffering losses, but its earnings recovery momentum is intact.

The investment bank stated that RWG, also known as the ‘cash cow’, is most likely to be shut for the next three months, widening its core net loss by 76%.

“Due to the recent surge of Covid19 cases, RWG was shut down on May 31, 2021. It was shut for three months from March 18 until June 18, 2020, and then again for 25 days from Jan 22 until Feb 15, 2021.

“We gather that RWG will be shut for three months this time and Genting SkyWorlds will only open in December 2021 to coincide with the school holidays,” Maybank IB noted in a report on GENM.

Hence, Maybank IB has reduced its forecast of visitor arrivals from 12 million to 8.5 million for this year.

The bank noted that, based on history, GENM’s share price will rally pre-opening of Genting SkyWorlds and because of that, it has a positive outlook.

“We believe that Resorts World New York City (RWNYC) is well-positioned to be awarded a lucrative downstate commercial casino licence. We also opine that 49%-owned Empire Resorts will be less burdensome going forward. We gather the Mashpee Wampanoag promissory notes may be written back,” it said.

In line with that, Maybank IB maintained a ‘Buy’ call on GENM with a higher target price (TP) of RM3.43 from RM3.17.

“Under a ‘blue sky’ scenario, our discounted cashflow-based TP may be raised by another 25% to RM4.30 for factors including RWNYC be converted into a downstate commercial casino, as we estimate GENM will boost financial year 2023 estimate earnings by RM800 million or 63% increase,” Maybank IB added.