Research house RHB Research Institute has declared the worst over for Genting Malaysia, with clear signs of improved volumes evident upon a recent visit to its flagship integrated resort.
In a Tuesday note reiterating its “Buy” rating for the Malaysian gaming operator, RHB analyst Loo Tungwye said Genting Malaysia is well positioned for a “cyclical recovery” with the current share price of RMB2.11 well below the target price of RMB2.59.
A key reason for such recovery is domestic tourism to Resorts World Genting, which is already enjoying solid growth in visitation that is the envy of its regional peers.
“We recently visited Resorts World Genting (RWG), and the significant improvement in visitor arrivals seen reaffirmed our positive view on the pace of recovery post reopening,” said Tungwye.
“The gradual relaxation of social distancing rules was apparent at the casino, with three to four standing guests now allowed to place bets, in addition to those by seated guests.
“Management previously guided that daily visitor arrivals have increased by 50% since re-opening. While it has yet to reach pre-pandemic levels due to social distancing measures, we believe that it has reached an inflection point.
“With international borders still closed, RWG will benefit from domestic tourism, as Malaysians can only travel within the country.
“We believe the pace of recovery will further accelerate with the gradual relaxation of the social distancing rules and the potential discovery of a vaccine.”
While Tungwye noted there remained some potential risks, including the chance of tighter restrictions should Malaysia endure another wave of the virus, he described Genting Malaysia stocks as a genuine value opportunity at their current price.
“As the world moves closer to a potential COVID-19 vaccine, Genting Malaysia is a clear beneficiary of a cyclical recovery,” he said.
“The stock is still trading at a trough valuation of 5.5 times FY21 EV/EBITDA – a >50% discount to its regional peer average of 12 times.
“Furthermore, Genting Malaysia’s generous dividends (a 5% yield) will serve to support its share price, and continue to reflect its sturdy balance sheet.”
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