We have turned positive on the long-term prospects of GenT as we opine that GenT will see an exponential YoY profit growth in FY22. However, we believe that FY21 performance will be weaker than expected due to the inter-state travel bans imposed in Malaysia lasting longer than expected. Nevertheless, we believe that investors would start to look beyond FY21 due to the timeline of vaccine rollouts despite rising Covid-19 cases of late. The development of RWLV is also going well and it is slated to open on 24 June 2021. The opening of RWLV is expected to add c. 4/6 % to GenT’s EBITDA for FY22-23. Hence, we roll forward our SOP valuations from FY21 to FY22, upgrading our Hold call to a BUY call at a TP of RM6.00.

Resorts World Las Vegas to open on 24 June 2021. RWLV is currently hiring employees and filling in its restaurant and shopping spaces as it prepares to open on 24 June 2021. Through a partnership with Hilton, RWLV will offer 3,500 guestrooms and suites from 3 premium Hilton brands, the largest multi-brand deal in Hilton’s history. RWLV will also be a limited smoking hotel-casino. Recall that the USD4.3bn resort is located on the west side strip near Circus Circus and Slots-A-Fun, 5km away from the Las Vegas convention centre. The opening of RWLV will coincide with other developments happening around the area. These include the Las Vegas Convention and Visitors Authority’s West Hall expansion and the under-construction MSG Sphere at the Venetian. We believe that RWLV is expected to go through a slow start from its official opening date to mid-FY22 before picking up more in FY23. We opine that things would be near pre-Covid-19 normalcy in FY23 as the entire population of the US is expected to be vaccinated by the end of 1H22. We expect RWLV to contribute 4/6% of EBITDA in FY22/23.

RWG expected to record an exponential recovery in FY22. We expect a significant YoY recovery for RWG in FY22 due to the timeline of vaccine rollouts and we are optimistic that Malaysia will achieve some form of normalcy in FY22. We believe that the public’s willingness to travel would be positively correlated with the vaccination rates in the country. However, we believe that FY21 will continue to be very challenging for GenM as inter-state travel is still banned. We now expect the inter-state travel ban to be in place for 1 to 2 more months and this would imply a footfall of less than 15% as compared to its pre-covid-19 levels for a total of more than 4 months for RWG since the inception of MCO 2.0.

Strong dividend yield to continue. We believe high dividend yields are expected to continue in FY21 despite our expectations on a slower recovery. We view that GenT will continue to dish out a flat YoY DPS of 22sen (yield: 4.4%) as we expect a strong recovery in FY22.

Forecast. We downgrade FY21 earnings by 49% as we factor in the longer than expected inter-state travel ban for RWG, while leaving our FY22 earnings assumption unchanged.

Upgrade to BUY at TP of RM6.00. We have upgraded our SOP-derived TP of RM6.00 (from RM4.64) despite our downgrade in FY21 earnings as we roll forward our valuation to FY22. We believe that investors would start to look ahead with plenty of positives in the pipeline like (i) an eventual lifting of inter-state travel ban in Malaysia (ii) higher vaccination rate and lower fears of Covid-19 infections and (iii) opening of RWLV.

Source: Hong Leong Investment Bank Research - 27 Apr 2021