KUALA LUMPUR (Feb 17): Hong Leong Investment Bank (HLIB) Research raised its target price for Genting Malaysia Bhd (GenM) to RM2.67 (from RM2.27) and upgraded its FY21 earnings forecast for the group by 12% to factor in the earlier-than-expected reopening of Resorts World Genting (RWG). The higher target price is still lower than GenM’s current stock price of RM2.75. 

In a note today, HLIB’s Low Jin Wu said the reopening of RWG was faster than anticipated as he had previously assumed a two-month closure when the movement control order (MCO 2.0) was first implemented on Jan 13, 2021.

“While we still expect gaming revenues to remain lacklustre (90% lower than CMCO period) due to the inter-state travel ban in place, this could be a positive leading indicator towards the reopening pace of RWG to visitors from other states due to the recent declines in Covid-19 cases in Malaysia,” said the analyst.

Following this, the research house maintained its "hold" call on the stock with a higher target price of RM2.67 as it imputes a higher earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast from its adjustments on visitorship (+3%) in FY21 while upgrading GenM’s enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio multiple assumptions to 8.5 times (from 7.5 times previously).

Low anticipates that investor sentiment is more positive at this juncture due to a more transparent timeline on the rollout of vaccines in Malaysia, quicker reopening of the economy as well as lower daily Covid-19 cases over the last week.

“However, we choose to remain conservative on GenM as there are still ample downside risks pertaining to the proliferation of Covid-19 cases in the future as GenM’s share price has already increased by 40% since its trough in November 2020,” he added.

RWG resumed its operation yesterday (Feb 16) at 6pm with strict SOPs in place.

GenM’s stock is down this morning by 2.48% or seven sen to RM2.75.