Although the gaming segment was off to a weaker start in 1Q22, we anticipate a strong recovery in subsequent quarters for the segment anchored by (i) RWG mainly from ramping up of capacity; (ii) RWS from the return of foreign visitors; and (iii) RWLV from the lifting of mask mandate as well as the return of foreign and convention visitors. Its other US and UK gaming assets are expected to sustain their strong performances. In addition, the current buoyant commodity prices should continue to benefit the group’s plantation as well as O&G segments. Maintain BUY with an unchanged TP of RM6.50.

GenS – encouraging return of foreign visitors. Following Singapore’s reopening of its international border to fully vaccinated travelers from 1 Apr 2022 and further relaxation of Covid-19 related regulations, foreign tourist arrivals are showing encouraging signs of recovery. In Apr and May 2022, foreign visitor arrivals had recovered to 18.4% and 28.1% of same period in 2019 (see Figure #1 and Figure #2). The return of foreign visitors should anchor the recovery for GenS in FY22 as international visitors were the major revenue contributor, historically accounting for c.70-80% of visitations to RWS.

RWLV was off to a weak start in 1Q22 due to weaker visitations impacted by (i) the rising Omicron cases; (ii) the state-wide mask mandate (which was implemented until 9 Feb); and (iii) a seasonally weaker quarter due to winter season. Consequently, Jan and Feb visitor volumes to Las Vegas were lower at 72.5% and 82% of 2019 level s respectively, while Mar saw a strong recovery (+27.5% MoM to 90.2% of 2019 level) (see Figure #3). The recovery momentum continued in Apr/May, with visitor volumes came close to pre-pandemic level at 95.5%/93.4% of 2019 figures. RWLV hotel occupancy rate also improved significantly from 54% in Jan to 85% in Mar, in line with Las Vegas Strip hotel occupancy trend (see Figure #4). Similarly, we expect RWLV hotel occupancy rate to improve further in Apr and May in tandem with the Las Vegas Strip occupancy trend.

RWLV recovery momentum should continue into 2H22 supported by the increase in foreign visitor arrivals and convention travels, both of which took longer to recover compared to US leisure visits. RWLV which has an Asian-inspired design and features several Asian themed attractions such as Southeast Asian themed outdoor pool, Singapore-based night club Zouk, Asian restaurant Fuhu and Genting Palace would likely be able to attract and benefit from the return of Asian visitors. Other than that, RWLV which typically had a soft midweek hotel occupancy rate will see its midweek occupancy rate boosted by the return of convention travelers to Las Vegas Convention Center (LVCC) which is located in its proximity (see Figure #5). The recent commencement of RWLV underground passenger transit station Phase 1 on 1 July (see Figure #6) will connect RWLV to LVCC via Elon Musk’s underground transportation system with travel time of 1-4 minutes only. The connectivity will not only boost RWLV hotel occupancy rate but will also allow conference guests to conveniently visit RWLV and access its amenities. Beyond FY22, the completion of another major project, Fontainebleau Las Vegas casino and hotel at end-2023, as well as upgrades to Sahara and Circus Circus, should help to revitalize the north strip area where RWLV is located.

An across the board improvement. Although the gaming segment was off to a weaker start in 1Q22 mainly dragged by RWG and RWLV, we anticipate a strong recovery in subsequent quarters anchored by (i) RWG mainly from ramping up of capacity; (ii) RWS from the return of foreign visitors; and (iii) RWLV from the lifting of mask mandate as well as the return of foreign and convention visitors. Its other US and UK gaming assets should also be able to sustain their strong performances. In addition, the current buoyant commodity prices should continue to benefit the group’s plantation as well as O&G segments, while the increase in the power tariff rate in its associate company Meizhou Wan power plant should help to mitigate the elevated coal prices resulting in narrower losses moving forward.

Forecast. Unchanged.

Maintain BUY with an unchanged TP of RM6.50 based on a 45% discount to our SOPderived value of RM11.80. We like GenT for its deep expertise and experience in managing the gaming and hospitality businesses and its well spread operations across different regions which help to mitigate regulatory and country risks. Furthermore, GenT provides an exposure to RWLV which we believe will have a strong growth potential in the longer term.

Source: Hong Leong Investment Bank Research - 6 Jul 2022