Nomura Research has cut its earnings estimates for Genting Malaysia by 10% for 2021, with the Malaysian IR operators now tipped to make a loss of around MYR184 million (US$45 million) due to ongoing COVID-19 related closures.
Nomura analysts Tushar Mohata and Alpa Aggarwal revised their estimates downwards in a research note published early Wednesday morning in which they pointed to the fact that Genting Malaysia’s UK properties will remain closed until at least 17 May under the government’s reopening schedule, and predicted ongoing losses for Resorts World Bimini in the Bahamas and Resorts World Catskills in New York.
They also noted that earnings at flagship Malaysia property Resorts World Genting will be impacted in 1Q21 by its recent one month closure and could be impacted further pending the country’s ever-changing COVID situation. 2Q21 earnings should improve, however, led by vaccination progress.
Nevertheless, Mohata and Aggarwal have revised down their 2021 estimates by 10% with revenue now forecast at around MYR6.32 billion (US$1.54 billion), down from an earlier estimate of MYR7.05 billion (US$1.71 billion). An estimated profit of MYR286 million (US$70 million) has also been revised down to MYR184 million.
More positive is the impending mid-2021 launch of RWG’s Skyworlds theme park, with Nomura noting that the hiring of staff is now well underway.
“We believe investors will overlook near-term bumpy earnings and are looking through to FY22F prospects, which look promising for Malaysia with the Skyworlds theme park scheduled to open,” the analysts said.
“We believe that 1Q21 earnings from Malaysian operations will be impacted due to ~1 month closure of the resort due to the movement control order. However, given the reopening since then, and progressive ramp-up of vaccination, revenue/EBITDA momentum should improve thereafter, in our view.
“There remains a possibility that any future wave of COVID-19 infections might impact visitation again later in 2021, but the risks of this happening will dissipate as vaccination ramps up in 2H21.”
Nomura has maintained a Buy rating on Genting Malaysia shares, with a target price of MYR3.80 suggesting 21% upside to the current price of MYR3.30.
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