CGS-CIMB reiterates ‘Buy’ call on Genting Malaysia


CGS-CIMB Securities Sdn Bhd (CGS-CIMB Research) reiterates its ‘Add’ call on Genting Malaysia Bhd with a higher target price (TP) of RM3.30 as the Resorts World Genting (RWG) sees pent-up demand from the return of local and foreign visitors.

Despite witnessing a strong return, RWG is currently facing a shortage of workers which held back its recovery.

RWG has also begun hiring more staff to cope with the demand and plans to open more rooms over the next six months as only half of the total hotel rooms are operating at the moment.

RWG’s website shows that its hotels are largely sold out for July, with healthy bookings into August.

With the rising interest rates, Genting Malaysia faces minimal risk as only 10% of its total debt at the end-financial year 2021 (FY21) was on floating rates.

Previously, at the end of the first quarter of 2022 (1Q22), Genting Malaysia’s net debt rose to its all-time high of RM9 billion.

“However, with the capital expenditure easing and earnings recovery, we see net debt/Ebitda falling from 3.6 times at end-FY22F to 2.3 times/1.9 times by end-FY23F/2,” the report noted today.

As such CGS-CIMB reiterated the ‘Add’ call and SOP-based TP cut 3% to RM3.30 from the current price of RM2.82.

“We revise Genting Malaysia’s core earnings per share (EPS) by -52% for FY22F, mainly to bake in slower recovery in RWG’s revenue, and +1%/-4% for FY23F/24F,” it said.

Meanwhile, visitors from China, which account for 4% of total hotel visitor arrivals in 2019, have not yet returned as its borders remain closed.

Nonetheless, it said the technical issue and closure of some rides remain a downside risk, which may constrain the ticket sales growth if the group further delays sorting it out.