KUALA LUMPUR (Sept 22): RHB Research Institute said the worst is over for Genting Malaysia Bhd (GenM) as it believes the group’s “current valuation is attractive to position for a cyclical recovery”.
The research house maintained its "buy" call for the group, with a target price (TP) of RM2.59 which is a 23% upside to its current share price of RM2.11.
“We recently visited Resorts World Genting (RWG), and the significant improvement in visitor arrivals seen reaffirmed our positive view on the pace of recovery post reopening.
“The gradual relaxation of social distancing rules was apparent at the casino, with three to four standing guests now allowed to place bets, in addition to those by seated guests,” said RHB analyst Loo Tungwye in a note today.
With international borders still closed, Loo said RWG will benefit from domestic tourism as Malaysians can only travel within the country.
“We believe the pace of recovery will further accelerate with the gradual relaxation of social distancing rules and the potential discovery of a vaccine,” he said.
“Management previously guided that daily visitor arrivals had increased by 50% since reopening,” he added.
Loo believes GenM has reached its inflection point, where almost all of its facilities have reopened, boosted by an encouraging business recovery.
“As the world moves closer to a potential Covid-19 vaccine, GenM is a clear beneficiary of a cyclical recovery. The stock is still trading at a trough valuation of 5.5 times FY21F EV/Ebitda (enterprise value/earnings before interest, taxes, depreciation and amortisation forecast for the financial year ending Dec 31, 2021), i.e. at an >50% discount to its regional peer average of 12 times,” the analyst noted.
He added: “Furthermore, GenM’s generous dividends (a 5% yield) will serve to support its share price, and continue to reflect its sturdy balance sheet."
Loo, however, highlighted some risks related to his call that include a slowdown in Covid-19 recovery, changes in the luck factor as well as regulatory risks.
At the time of writing, shares in GenM had risen two sen or 0.95% to RM2.13, bringing its market value to RM12.6 billion.