THE worst is likely over for Genting Malaysia Bhd (GenM), as business recovery is encouraging after a disappointing second quarter, according to RHB Investment Bank.
“Management indicated that business recovery at Resorts World Genting (RWG) is encouraging. Since reopening, daily visitor arrivals have increased from 30,000 to 45,000 currently, about 57% of pre-movement control order (MCO) levels,” said RHB.
The research house also noted that the hotel rooms in operation at RWG have risen from 1,800 to 4,700, with the occupancy rate now at about 90%.
For overseas operations, most of GenM’s land-based gaming operations in the UK have re-opened. US operations remain closed, but the cash burn rate has also dropped by about 30%, which should mitigate losses, according to RHB.
This follows GenM reporting a core loss of RM796.3 mil for the second quarter of its 2020 financial year, which comes in below expectations due to the higher-than-expected operating costs incurred during the quarter.
Still, an interim dividend of 6 sen was declared despite the losses, which RHB notes is a positive surprise.
The research house also believes that with most facilities reopened and RWG seeing encouraging recovery, as well as a potential Covid-19 vaccine, GenM is well positioned to be a winner of a cyclical recovery.
“While social distancing rules and international travel restrictions will affect near term recovery, GenM’s generous dividends continue to reflect its sturdy balance sheet in difficult times,” said the research house.
RHB upgraded GenM to a buy call, with a reduced target price of RM2.59 from a previous RM2.66.
At 3.55PM, GenM’s shares were last done at RM2.31, up 8 sen, with 17.97 million shares traded. – Aug 28, 2020
