Reopening in time for the busy 4Q21
Maintain BUY and MYR3.40 DCF-based TP
After being shut for four months, RWG reopened on 30 Sep 2021. We are optimistic that this will drive GENM to breakeven in 4Q21 after what is likely six consecutive quarters of core net losses. Catalysed by the opening of Genting SkyWorld in 4Q21, we expect RWG visitor arrivals to further recover to pre-COVID-19 levels from FY22E onwards. Our earnings estimates, BUY call and MYR3.40 DCF-based TP are unchanged. We continue to like GENM as a liquid COVID-19 recovery play.
RWG reopened on 30 Sep 2021
RWG has been shut since late May 2021. With new COVID-19 cases easing (Fig. 1) due to rising COVID-19 vaccinations (Fig. 2), GENM reopened RWG on 30 Sep 2021 or a month earlier than we expected. Only Pahang residents will be allowed to visit RWG for now but we believe that residents from other states will be visiting soon when 90% of Malaysian adults are fully vaccinated (85% currently). Our estimates and TP are unchanged as October is traditionally not very busy.
3Q21 likely a washout but hope floats for 4Q21
As RWG has been shut for almost the whole of 3Q21, we expect GENM to generate 3Q21 core net loss similar to that of 2Q21 of MYR353.4m. That said, we expect GENM to breakeven in 4Q21 thanks to RWG reopening. We conservatively expect RWG to welcome 3.0m visitors in 4Q21 or only half of that welcomed pre-COVID-19 in 4Q19 at 6.2m. Recall that when RWG first reopened post-COVID-19 in 3Q20, it welcomed 4.0m visitors (Fig. 3). Thus, we are comfortable with our FY21E estimates.
Genting SkyWorlds to drive next leg of growth
The next catalyst for GENM is the opening of the much delayed MYR3.0b Genting SkyWorlds theme park at RWG. We maintain our view that it will open in Dec 2021 to coincide with the school holidays. Going forward, we are confident that it will attract both gaming and non-gaming visitors to RWG. Our FY22E/FY23E core net profits are based on FY22E/FY23E RWG visitor arrivals of 24.2m/26.2m. In short, we expect some sort of normalcy resembling pre-COVID-19 levels to return in FY22E.