We maintain our sector call of NEUTRAL as the duration of Covid -19 remains uncertain at this juncture. We increase our GenT TP to RM4.95 (from RM4.77) after updating the fair value changes of its listed subsidiaries. On a longer-term basis, GenT (BUY, TP: RM4.95) is our top pick as it trades at a huge discount to its SOP-valuation causing it to be the most deep-valued stock amongst the other counters.

NFOs have resumed. The NFOs were finally allowed to resume operations on 17 June after a 3-month closure since the MCO was implemented on 18 March. Approximately 40 draws were lost during the closure which will lead to BToto’s 4QFY20 registering losses. As such, we expect no dividends to be declared in the upcoming quarterly reporting which brings our FY20 DPS estimates to 8 sen, which were fully declared in 1HFY20. Due to the nature of its business, we expect sales to be rather inelastic while the social distancing measures should not have a significant impact towards traffic. As such, we expect the rest of the year to register normalised earnings and dividends to resume. BToto remains a HOLD with TP of RM2.24.

GenM’s RWG to operate at limited capacity... Resorts World Genting has reopened on 19 June, which is earlier than anticipated albeit at limited capacity. Only two casinos (SkyCasino and Genting Club) will be opened for now, with access only given to Genting Reward members (public entry into the casino will resume in the near term). The casino will be opened up on a staggered basis (largely dependent upon customer traffic volume) in order to manage its costs. Furthermore, GenM has laid off some of its workforce and reduced salaries of its staffers during this outbreak. For 2HFY20, the operating environment will remain challenging given the limited operating capacity and the public’s fear towards a potential second wave.

…while its foreign casinos remain shut. In the UK, casinos were excluded from the list of hospitality and leisure establishments which are able to resume operations on 4 July. The UK’s betting and Gaming Council continues urging ministers to work with casino operators to allow for operations this summer. Over in New York, casinos were also excluded from the list of upcoming reopening (i.e. Phase 4, which was originally billed as the final stage of reopening). GenM remains a HOLD with TP of RM2.86.

GenS’ RWS to reopen. With Singapore undergoing the Phase 2 of its reopening of the economy, operations have gradually begun in both MBS and RWS. Similar to Malaysia, the casino (reopening on 1 July) capacity will be capped at 25% and entry will be limited to existing casino members and annual levy holders only for now. Despite the near-term challenging outlook, the government’s Job Support Scheme which provides wage support up to a period of 9-months until end-2020 would provide a buffer for GenS to sustain through the pandemic. Furthermore, we reckon that GenS is on a relatively strong footing given its war chest of close to SGD3.7bn (net cash). GenS remains a HOLD with TP of SGD0.79.

We maintain our sector call of NEUTRAL as the duration of Covid-19 remains uncertain at this juncture. We increase our GenT TP to RM4.95 (from RM4.77) after updating the fair value changes of its listed subsidiaries. On a longer-term basis, GenT (BUY, TP: RM4.95) is our top pick as it trades at a huge discount to its SOP valuation causing it to be the most deep-valued stock amongst the other counters. By taking GenT’s market cap and dividing it by the market cap of its listed subsidiaries (adjusted for stake), GenT is currently trading at only 0.6x of its effective subsidiary ownership value, or at -3SD below its 10-year mean (Figure #9). Note that this multiple metric has not taking into account the additional value of GenT’s other unlisted revenue drivers which would further contribute to its fair value (e.g. power, O&G, management fees, holding company net cash position)

Source: Hong Leong Investment Bank Research - 8 Jul 2020