RWG will resume its operations on the 16th of February 2021 with stricter SOPs. The re-opening of RWG is a positive surprise for us but its visitorships are still expected to be at least 90% lower than the CMCO period as cross-state travel is still banned. However, based on the lower trend of Covid-19 cases in Malaysia, we believe that RWG’s recovery would be faster than previously anticipated. Hence, we maintain our HOLD call with a higher TP of RM2.67 based on 8.5x (from 7.5x) FY21 EV/EBITDA, upgrading our net profit forecast for FY21 by 12%.

NEWSBREAK

RWG will resume operations at 6pm on Tuesday, 16 February 2021 with strict SOPs in place. Some of RWG’s hotels, facilities, attractions and other offerings will be subjected to revised operating hours, limited availability or temporary closure.

HLIB’s VIEW

Positive news. The reopening of RWG was faster than anticipated. Recall that we have previous assumed a 2-month closure when the MCO2.0 was first implemented on the 13th of January 2021. While we still expect gaming revenues to remain lacklustre (c.90% lower than CMCO period) due to the inter-state travel ban in place, this could be a positive leading indicator towards the reopening pace of RWG to visitors from other states due to the recent declines in Covid-19 cases in Malaysia.

Forecast. We upgrade our FY21 earnings by 12% to factor in the faster than expected re-opening of RWG while leaving our FY22 earnings unchanged. We believe that its business should normalise to CMCO levels in less than 1 month.

Maintain HOLD with a higher TP of RM2.67 (from RM2.27). We have increased our TP to RM2.67 (from RM2.27 previously) as we impute our higher EBITDA forecasts from our adjustments on visitorship (+3%) in FY21 while upgrading our EV/EBITDA multiple assumptions to 8.5 (from 7.5x previously). We believe that investor sentiment is more positive at this juncture due to (i) a more transparent timeline on the roll out of vaccines in Malaysia, (ii) quicker reopening of the economy and (iii) lower daily Covid- 19 cases over the last week. However, we choose to remain conservative on GenM as there is still ample downside risks pertaining to the proliferation of Covid-19 cases in the future as GenM’s share price has already increased by c.40% since its trough in November 2020.

Source: Hong Leong Investment Bank Research - 17 Feb 2021