KUALA LUMPUR (July 5): The supply and demand mismatch in Resorts World Genting (RWG) has dragged down Genting Malaysia Bhd (GenM)’s earnings in the first quarter (1QFY22), according to Hong Leong Investment Bank (HLIB) Research.

In a research note on Tuesday (July 5), HLIB said the mismatch came about after RWG ramped up its operation capacity while demand fell because of rising Omicron cases.

The research house has maintained its "buy" call on GenM with an unchanged target price of RM3.91 as it believes that investors will look ahead as RWG scales up its capacity and visitations improve.

“We continue to like GenM as we view RWG as one [of] the prime beneficiaries with borders reopening, especially with the addition of [the] theme park that complements its gaming attraction, making it an attractive tourism spot that could capture visitors from all walks of life.

“Additionally, the current weak local currency is also a boon to RWG for reasons highlighted above,” it said.

HLIB pointed out that the weakening ringgit could give a twin boost to RWG through an increase in foreign tourists and mass-market gamblers as RWG becomes a cheaper gaming destination.

On SkyWorlds, the research house said the completion of the theme park marked the end of a major capital expenditure (capex) for GenM while the anticipated earnings recovery should also generate positive cash flow for the group.

“The opening of SkyWorlds allows RWG to attract a large and previously untapped Muslim market which represents circa 63% of Malaysia's population.

“GenM will be able to harness the full potential of SkyWorlds in 2H22 as all the attractions within SkyWorlds will be opened, the capacity increase from the easing of restrictions and the reopening of the Genting SkyWorlds Hotel within the theme park.

“The increased footfall to the theme park should have a positive spillover effect to the other venues in RWG,” it said.

Separately, CGS-CIMB also picked GenM as its top picks in its Retail Investors’ Sentiment report.

At noon break, shares in GenM were one sen or 0.35% higher at RM2.84, giving it a market capitalisation of RM16.86 billion.