KUALA LUMPUR (Sept 20): CGS-CIMB Research estimated that Genting Malaysia Bhd's (GenM) fair value could rise 8%-14% to RM4.32-RM4.55, if its wholly-owned subsidiary Resorts World New York City's (RWNYC) bid for a US casino licence is successful.
The New York State Gaming Commission has resumed the bidding process for three downstate commercial casino licences, which is seen as an important catalyst for GenM's reassessment, given that RWNYC is among the front runners.
“We believe that should RWNYC win a licence in 2024, the minimum required capital of US$1 billion (RM4.69 billion) could be funded by the potential sales proceeds of its Miami land, for which it has received an offer in excess of US$1.23 billion.
“As such, we estimate this could lift our fair value by 8%-14% to RM4.32-RM4.55,” said the research house in a note on Wednesday.
On the other hand, CGS-CIMB’s findings from its visit to Resorts World Genting (RWG) suggested that both domestic and foreign tourist arrivals are on the path to full recovery, while operating capacity has largely returned to pre-Covid-19 levels.
“We observed non-gaming activities, such as restaurant dining and the indoor theme park (Skytropolis) being largely packed, while the outdoor (SkyWorlds) theme park was busy with ongoing promotional campaigns.
"Based on our observations, RWG’s casino capacity seems to be fully restored to pre-pandemic levels, with more slot machines and gaming tables that are well-manned across both gaming floors (evidence of easing of the croupier shortage).
“This puts RWG in good stead to benefit from the seasonally higher fourth-quarter and first-quarter traffic as tourist arrivals continue to pick up, in our view.
“Improving revenue generation on higher visitations should allow RWG’s Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin to come in above the management’s guidance of 30%-33% for the financial year ending Dec 31, 2023, with the second-quarter/first-half Ebitda margins at 34.7%/33.0% [respectively], in our estimate,” said CGS-CIMB.
The research house maintained its "add" call, and left its target price for GenM at RM4. At RM4, the stock would be trading at 21 times calendar year 2024 price-earnings, with a 4% dividend yield.
“Downside risks include higher-than-expected operating cost and slower Malaysian gaming revenue recovery.”
At the time of writing on Wednesday, shares in GenM were trading up two sen or 0.79% at RM2.55, giving it a market capitalisation of RM15.14 billion.