PETALING JAYA: Robust tourism recovery at Resorts World Genting (RWG) is expected to support Genting Malaysia Bhd
’s earnings growth.
CGS International Research (CGSI Research) said that the number of visitors from China going to RWG was almost back to pre-Covid-19 levels in the fourth quarter of 2024 (4Q24), with more high-yielding tourists than lower-yielding tour groups.
“RWG’s reopened casino floor area should also prove timely to cater for the increase in gaming volume and visitors leading up to the Chinese New Year period,” the research house said.
In the first nine months of last year, RWG recorded 21 million visitors with 74% being day trippers.
The research house said Singapore visitors were back to pre-Covid-19 levels, increasing 15% year-on-year at 910,000 guests in the first nine months of 2024 while Chinese visitors in 3Q24 reached 114,000 compared with 97,000 for 2Q24 and 44,000 in 3Q23.
The research house added that Genting Malaysia seeks to continue capitalising on the visa exemption for Chinese tourists until 2026 as well as increased airline capacity and flight frequencies from China to Malaysia.
It said that the incentives and programmes undertaken by the Tourism Ministry leading up to Visit Malaysia Year 2026 also augured well for Genting Malaysia as they help to attract big-spending China visitors to RWG.
CGSI Research said it believes the timely reopening of a substantial portion of the casino, catering to the mass market, served as a positive boost leading up to the Chinese New Year holiday period.
“The reopened mass-market area now incorporates more digitalisation, with the rollout of electronic table games with smaller bet sizes to attract younger visitors and to control manpower costs.
“We view this as a positive development as Genting Malaysia would be able to cater for the increase in gaming volume stemming from the increase in visitors leading up to Chinese New Year, providing support to 1Q25 earnings while managing manpower costs.” the research house said.
CGSI Research maintained its “add” call for the resort operator as it expected to see a robust three-year earnings per share compound annual growth rate of 42% over 2023 to 2026, supported by the recovery in tourism and growth in RWG’s revenue.
With an improved earnings performance and free cashflow generation, the research house believes that Genting Malaysia should be able to maintain a dividend payout of 15 sen per share for 2024, which is equivalent to an interim dividend yield of 4% and 2024 dividend yield of 6.8%.
However, said a key risk for Genting Malaysia’s share price stems from the suit by RAV Bahamas Ltd against Genting Americas Inc, which could affect Genting Malaysia’s bid for a casino licence in New York.
That said, the research house said this did not affect its valuation as it had not factored in any potential upside from its New York casino bid.
CGSI Research added that Genting Malaysia should expect the long-term earnings before interest, tax, depreciation and amortisation (Ebitda) margin for RWG to be sustainable around 31% to 32%.
It pointed out that Genting Malaysia had been able to hold its Ebitda margins at 31% for the first nine months of last year with other cost savings initiatives despite having to deal with an increase in the sales and services tax from 6% to 8% in April last year.
The research house said Genting Malaysia planned to stay focused on markets that provide better yields, as well as expand in more profitable areas.
