• Genting BHD (GENT) reported a weak set of results - core-LATAMI of RM538.4m is below both our and consensus expectations, due to weaker than expected performance from its subsidiary, Genting Malaysia
• Although the recovery of operating profits for both Genting Malaysia and Genting Singapore is encouraging, we believe that the recovery remains fragile as overall visitation will still fluctuate until a vaccine is available 
• We have raised our TP to RM4.20, after reviewing the fair value of its subsidiaries, but keep our HOLD call unchanged, as we believe that current valuation is fair

Pent up demand drive visitation post the reopening

The recovery in gaming revenue in 3Q20 was stronger than we had expected, mainly due to better performance from its Singapore operations (Genting Singapore), where revenue only declined by 54%, despite foreigners contributing to 70% of their visitation previously. Similar to Malaysia, the pent-up demand from local customers have help to compensate for the decline in foreign customer. We believe that the strong recovery momentum is likely to ease after the initial excitement, as concerns over the resurgence of COVID-19 remains a risk. Without the full reopening of borders, we do not foresee gaming contribution to recover to pre COVID-19 levels in 2021.

Resort World Las Vegas is set to open by summer 2021

Management guided that the phase 1 of the Resort World Las Vegas (RWLV) is still on schedule to open its doors by summer 2021, and has started the recruitment process for the facility. Although management has indicated that they have hired a team of senior executives to oversee the opening, we believe it is still not clear on whether GENT will operate the facility by themselves or will be hiring other operators to help manage the facility. Given that the GGR at Las Vegas is still down by 37% yoy in Sep, we remain sceptical on whether the asset would be profitable in the near term

Maintain HOLD with an higher TP of RM4.20

We have revised our forecast for FY20/21/22E by -10.5%/-1.5%/2.7% to input the current performance and also the margin improvement arising from the cost savings measures implemented over the past few months. We have revised our RNAV-based 12-month TP to RM4.20, as we reviewed the fair value of its core-subsidiaries, but keep our HOLD call unchanged.

Source: Affin Hwang Research - 27 Nov 2020