KUALA LUMPUR (March 20): Maybank IB has maintained its “buy” rating on Genting Malaysia Bhd (GenM) at RM2.90 with a lower target price (TP) of RM3.16 (from RM3.26) and said GenM’s mass market gross gaming revenue (GGR) will take a back seat in financial year 2024 (FY2024) after GenM temporarily shuttered the Circus Palace and Hollywood mass gaming floors for renovation.
In a note on Monday, the research house cut GenM’s FY2024 earnings estimates by 15% but left FY2025 and FY2026 earnings estimates unchanged.
“We also trim our DCF (discounted cash flow)-TP to RM3.16 from RM3.26,” it said.
The Circus Palace and Hollywood mass gaming floors were shuttered for renovation on Feb 28.
Maybank IB said assuming that the Circus Palace and Hollywood mass gaming floors will reopen nine months from Feb 28 and 50% of their mass market GGR migrate to the Sky Casino, the research house lowered its FY2024 Resorts World Genting (RWG) mass market GGR forecasts by 19%.
“Net impact of the above is to cut FY2024E earnings by 15%.
“Anyhow, we maintain FY2025E/FY2026E earnings which are premised on RWG total GGR recovering to 104%/106% of FY2019A levels.
“History has shown us that RWG GGR grows after gaming floors are expanded or renovated,” it said.
Separately, the warning issued by China's embassy in Singapore for its nationals to refrain from all forms of betting overseas is unlikely to have a significant impact on the casino in Malaysia, said analysts.
However, they said that the statement could have a more adverse effect on Singapore as the gaming resorts in Singapore are more dependent on foreign visitors.
On Monday (March 18), Reuters reported that the Chinese Embassy in Singapore reminded its nationals to enhance their legal awareness and stay away from gambling activities. It said in a statement that cross-border gambling by Chinese citizens is suspected of violating the Chinese laws, even if overseas casinos are legally opened.
Meanwhile, Nomura analyst Tushar Mohata shared a similar view that the announcement will have a marginal negative impact on the integrated resorts in Malaysia and Singapore.
“Amongst Genting’s Malaysia and Singapore resorts, Singapore is more dependent on foreign visitors, as Malaysia is more of a domestic market. The exact impact is hard to quantify as it is still early days,” he told The Edge via email.