- The emergence of the H7N9 bird strain in China could affect the travel industry in the country. Traffic volume would decline in and out of China.

- According to the World Health Organisation, the extent of the outbreak is still being investigated and it is too early to tell whether the cases signal a pandemic.

- There is a possibility that if H7N9 threat were to become more serious, then Genting Malaysia Bhd (GenM) and Genting Singapore PLC (GenS) would be affected.

- A substantial portion of visitors in “Resorts World Genting” and “Resorts World Sentosa” (RWS) come from China. RWS recorded 16 million visitors in FY12 while about 20.9 million people visited the highlands resort in Malaysia.

- Between GenM and GenS, we reckon that GenS would be more affected as high-rollers account for a significant amount of gaming revenue.

- We believe that most of GenS’ high-rollers are from China.

- VIPs accounted for 51% of GenS’ gross gaming revenue and 30% of net gaming revenue in FY12. In Malaysia, high-rollers accounted for 36.5% of GenM’s gaming revenue in FY12.

- Day-trippers accounted for more than 70% of GenM’s visitors in FY12. Hotel guests accounted for the balance 30%. Roughly 63% of the hotel guests were Malaysians in FY12.

- During the SARS outbreak in Asia in FY03, revenue of GenM’s leisure and hospitality division edged down 1% to RM2.6bil.

- Subsequently, the division’s turnover recovered 6% to RM2.8bil in FY04.

- Share prices of GenM and Genting Bhd fell by more than 20% each from their highs to their lows in 2003 due to the SARS outbreak.

- After the disease abated, GenM’s and Genting Bhd’s share prices rebounded by more than 60% each.

- We are maintaining our BUY recommendations on GenM and Genting Bhd. We have a SELL on GenS.

Source: AmeSecurities