Maintain BUY call with lower TP of MYR3.30 (-2%)
The Omicron wave which began in Malaysia in Feb 2022 slowed RWG’s
recovery. Thus, we cut FY22E EPS by 40%. Yet, our FY23E/FY24E EPS are
little changed as the aforesaid wave is subsiding. There could be another
MYR0.53/sh of upside potential if RWNY is converted into a full casino
(link). We have also introduced an expanded ESG tear sheet for GENM and
assigned it a slightly below average overall score of 48, based on its
aggregated quantitative/qualitative/target-based metrics.
Cut FY22E EPS but FY23E/FY24E EPS little changed
We understand that business at RWG slowed from Mar 2022 due to the
Omicron wave. Thus, RWG reopened only ½ of its c.10k rooms despite
being allowed to reopen all from 1 Apr 2022. Hence, we cut FY22E RWG
visitor arrivals to 21m (3m hotel guests and 18m day trippers) from 24m
(6m hotel guests and 18m day trippers) on RWG operating c.5k rooms in
FY22E and cut FY22E EPS by 40%. Yet, FY23E/FY24E EPS which are based
on 26-27m RWG visitor arrivals are little changed (+0%/+1%).
RWG VIP market intact post borders reopening
As the number of new COVID-19 cases in Malaysia is falling, we expect RWG
to reopen all c.10k rooms from FY23E onwards (Fig. 1). Our channel checks
also reveal that few Malaysian VIPs are flying to Singapore, Phnom Penh
and Manila to gamble relative to pre-COVID-19 levels. We gather that
Malaysian VIPs are rebuilding their businesses and a weak MYR is
discouraging overseas travel. We believe this will put a floor of RWG’s VIP
volume which we estimate averaged at MYR4.4b/month in FY21 (Fig .2).
RWG mass market to get a boost from Singaporeans?
Also, our sources at the 2 Singaporean IRs also suspect that many
Singaporean mass market (MM) gamblers are heading to RWG to gamble
rather than the other way around due to the strong SGD and casino entry
levy in Singapore (SGD150 for 24 hours or SGD3,000 p.a.) (Fig. 3 to 5). PreCOVID-19, Singaporean hotel guests accounted for 5% of RWG visitor
arrivals. Including day trippers, we gather that Singaporeans could have
accounted for 10% of RWG visitor arrivals pre-COVID-19.