Genting valuations undemanding as business prospects improve


THE outlook for the gaming segment giant Genting Group is improving according to Hong Leong Investment Bank Bhd report which has maintained its ‘Buy’ rating on Genting Bhd.

Its analyst Tan Kai Shuen wrote that Genting stands to benefit from improvements in its gaming, leisure and hospitality segments from Genting Malaysia Bhd (GenM) Genting Singapore (GenS) and Resorts World Las Vegas (RWLV).

“GenM witnessed a strong return of local visitors to Resorts World Genting (RWG) since Malaysia lifted the interstate travel ban on Oct 11, while Singapore is progressively easing its border restrictions which will bode well for GenS as it relies heavily on international visitors,” Tan stated in a report on Genting last week.

According to him, Genting provides exposure to RWLV, which offers strong growth potential in the longer term and contribute positively toward its financial.

For its first full quarter results in 3Q21, RMLV recorded a revenue of US$175 million (RM722.8m) and Ebitda of US$27 million (RM110m).

Las Vegas Strip gaming revenue took a dive in August, declining 21.2% on a month-on-month (MoM) basis but it regained some ground in September and October.

The result was impacted negatively by the state’s face mask mandate in public indoor spaces regardless of vaccination status since July 30, 2021.

Prospect for GenM are looking up with the increasing number of people returning to RWG with the opening of the SkyWorld theme park and favourable contributions from its US and UK divisions.

The investment bank has thus maintained its ‘Buy’ call on GenM with an unchanged target price (TP) of RM3.61.

Although the prospects of Genting are improving, its current share price is trading at a 23.3% discount to its 2019 average share price (pre-Covid level) while its subsidiary GenM is already trading around its pre-Covid level.

While Genting is exposed to diversified business segments, a majority (60%) of its value is still from core business in gaming, leisure and hospitality, Tan added.

In spite of that, the share price is trading at undemanding valuation at more than 50% holding discount and 23.3% discount to its 2019 average share price (pre-Covid level).

Given that, HLB has maintained a ‘Buy’ rating for Genting with a higher TP of RM6.20 (from RM5.65) based on a lower 45% discount (from 50%) to SOP.

“We lower our holding discount as we believe the overall prospect of its gaming segment is improving.”

“We like Genting for its solid track record and experience in managing the gaming and other hospitality businesses as it navigates well through different business cycles despite the Covid-19 pandemic,” the report noted.