GenM announced the resumption of business at RW Genting and RW Awana on 19 June 2020 while RW Kijal and RW Langkawi will resume operations on 18 June 2020. We are positive on the news as we were previously wary on the actual opening date given the risk factors of a casino operation during this pandemic. To manage costs, the casino will be opened with limited capacity which is lifted on a staggered basis, depending on the customer traffic volume. We keep our forecasts unchanged for now pending further clarity on the public’s reception towards the opening. Maintain HOLD with a higher TP of RM2.86 (from TP: RM2.55) as we reduce our holding discount placed towards GenM to 10% (from 15%) given the opening of RWG which was previously uncertain.

NEWSBREAK

GenM announced the resumption of business at RW Genting and RW Awana on 19 June 2020 while RW Kijal and RW Langkawi will resume operations on 18 June 2020. Separately, retail shopping outlets at RW Birmingham in UK have reopened on 15 June 2020 while its casinos have been indicated to be able to reopen from 4 July 2020, subject to conditions. In the US, both RW NYC and RW Catskill remain closed.

HLIB’s VIEW

Positive on the news. We are positive on the news as we were previously wary on the actual opening date given the risk factors of a casino operation during this pandemic. Note that enhanced safety measures will be placed in the entire RWG, especially in the casinos. Measures taken would include body temperature checks, mandatory use of face masks, provision of hand sanitisers, limited players per table, regular sanitisation of machines, amongst others.

Limited capacity. To manage costs, the casino will be opened with limited capacity which is lifted on a staggered basis, depending on the customer traffic volume. Entry into the SkyCasino and Genting Club will be for Genting Rewards members only while public entry into the casino will resume in the near-term. The member-only entry clause should not deter business volume as the member registration process is rather instant. Instead, business volume would likely be dependent upon the public’s reception towards safety concerns. FY20 will continue to be a challenging year as the duration of the outbreak remains uncertain and we do not discount citizens to continue avoiding crowded places for the time being.

Forecast. We keep our forecasts unchanged for now pending further clarity on the public’s reception towards the opening. Nonetheless, we currently expect the potential earnings in 2HFY20 to be insufficient to offset the losses in 1HFY20. Maintain HOLD with a higher TP of RM2.86 (from TP: RM2.55) as we reduce our holding discount placed towards GenM to 10% (from 15%) given the opening of RWG which was previously uncertain. Share price may potentially see a positive reaction to the recent news due to sentiment but we note that our hold call and fair value is already premised upon FY21 numbers (pegged to -1SD below the 10-year mean)

Source: Hong Leong Investment Bank Research - 18 Jun 2020