Continue to place your bets
? Business rebound at RWG YTD; SkyWorlds visitors may pick up in 2H22F.
? RWNYC may win a full casino licence soon and add 13-15% to GENM’s TP.
? Reiterate Add and TP of RM3.40. GENM is our top Malaysian casino pick.
RWG is seeing progressively better business volumes
We gather that most of Resort World Genting’s (RWG) casino areas are now opened in
response to good demand, with entry allowed for non-members since late-Jan 22. As
Malaysia’s international borders reopened on 1 Apr, RWG has also begun to advertise
actively overseas, especially in Singapore (foreign tourists made up 10-15% of all visitors
in FY19). We expect RWG’s FY22-24F EBITDA margin to ease slightly to 33% from
4Q21’s 34% (win-rate normalised) on higher opex (staff re-hiring and SkyWorlds). While
electricity tariffs will rise by 10% with the imposition of surcharges in Feb-Jun 22, we
estimate utilities (including water) was less than 10% of opex (ex-depreciation) in FY19.
SkyWorlds’ visitor arrivals should improve in 2H22F, in our view
Visitors to RWG’s SkyWorlds Theme Park have been slower than expected since its soft
opening on 8 Feb 2022. We think this will improve in 2H22F due to the opening of more
rides (only 75% open now), pent-up demand as Covid-19 worries abate (12 Apr’s new
cases are 73% off the 5 Mar peak) and promotional campaigns. We have assumed
1.5m/2.3m/2.5m SkyWorlds visitors in FY22F/23F/24F (3.1m visited old outdoor theme
park in FY12). Including spillover benefits on other RWG facilities, we see a net negative
hit of RM174m/58m to GENM’s PBT in FY22F/23F and accretion from FY25F onwards.
RWNYC should do well at the slots in FY22F …
As per the New York State Gaming Commission, Resorts World New York City’s
(RWNYC) 1Q22 gross gaming revenue rose 18% yoy (-2% qoq) and is now a mere 3%
shy of 1Q19’s. We think occupancy rate (4Q21: 37%) at its new Hyatt Regency hotel
(opened in Aug 21) will rise in FY22F, as passenger traffic at JFK International Airport
(4km away) recovers further (up 2.2x yoy in Feb 22 but still below Feb 19’s by 26%).
… and could win big at the tables starting next year
The FY23 New York State budget, approved on 9 Apr 2022, includes the award of up to 3
downstate full casino licences potentially by year-end/early-2023 for at least US$500m
each. As an existing site, we believe RWNYC may have an edge as it will be able to
quickly generate more gaming taxes/create new jobs for the state (vs. 3-4 years for a
new casino resort), and it already has community support/siting approvals. If it wins, we
see extra net profit of RM274m from RWNYC in FY26F (higher in FY23-25F, before a
third casino opens), enhancing GENM’s equity fair value by 44-51 sen/share.
Reiterate Add and SOP-based TP of RM3.40
Re-rating catalysts: FY22F earnings recovery and RWNYC winning a full casino licence.
Its FY23F EV/EBITDA of 6.8x is 1.0 s.d. below its historical pre-Covid-19 mean, with
good 4.9-7.8% FY22-24F yields. Downside risk: further Covid-19-led resort closures.