CGSI Research said higher foreign and domestic tourist arrivals are expected to lift RWG revenue past an all-time high.
PETALING JAYA: Genting Malaysia Bhd
(GenM) is expected to see earnings recovery in the coming quarters, driven by tourism growth and increased revenue from its integrated leisure complex, Resorts World Genting (RWG).
Expressing its optimism on GenM’s prospects, CGS International (CGSI) Research pointed out that foreign visitor arrivals, especially from China, have improved while domestic tourism growth remains robust. These look set to drive GenM’s earnings in the coming quarters, the brokerage noted.
CGSI Research reiterated its “add” call on GenM as a “tourism recovery play”, with a lower sum-of-parts-based target price of RM3.65 a share, as compared with RM4 previously. This followed a downward revision in the brokerage’s earnings forecast for GenM.
CGSI Research cut its core earnings per share (EPS) estimates for GenM by 31.5% for 2024, 25.3% for 2025 and 13.6% for 2026 mainly due to higher tax rate assumptions, as the company has fully utilised its tax incentives from the Genting Integrated Tourism Plan.
The research house also increased the operating cost of RWG to take into account the higher service tax of 8% incurred by its gaming operations since March 1, 2024.
“Despite lowering our earnings estimates, we still expect GenM to post a strong three-year EPS compounded annual growth rate of 42% in 2023 to 2026, driven by RWG,” CGSI Research said.
“We see RWG’s revenue growing by 10.5% in 2024, 9.7% in 2025 and 5.2% in 2026, with a recovery in total visitors to RWG helping to drive business volume and earnings before interest, tax, depreciation and amortisation growth,” it added.
CGSI Research said higher foreign and domestic tourist arrivals are expected to lift RWG revenue past an all-time high.
It noted data from Tourism Malaysia indicated that total tourist arrivals in Malaysia in the first half of 2024 (1H24) rose 29% year-on-year (y-o-y), with Chinese tourist arrivals in the same period almost triple of 1H23, and June 24 arrivals surpassing the corresponding 2019 period for the first time since the pandemic.
Pointing to data from China’s National Immigration Administration, CGSI Research noted that there were 7.59 million entries and exits of mainland Chinese travellers recorded during China’s National Day holidays from Oct 1 to 7 this year, up 33.2% y-o-y.
“This comes as China’s international airline capacity (number of seats) to Malaysia has exceeded pre-pandemic levels since June 2024, according to available Official Airline Guide data, and is expected by end-2024 to continue increasing,” CGSI Research said.
Further, it noted the Statistics Department reported that Malaysia’s domestic tourism sector saw 127 million visitors in 1H24, up 21.5% y-o-y, with domestic tourism expenditure up 27% y-o-y to RM52bil.
“We believe that domestic and foreign tourist arrivals and spending would only get stronger heading into 2H24, which should drive business volumes and lift RWG’s revenue past 2019’s all-time high,” CGSI Research said.
