• We have cut visitation forecast for 2021E to 23.7m (2019: 28.7m), as we assume that the current interstate travel ban could last for at least 1 month
• As a result, we have also lowered our EPS forecast by 22.7% for 2021E - the drop in earnings is more severe due to a reduction in operating leverage
• We maintain our SELL call, but lower our RNAV-based TP to RM2.07, as we believe that earnings will remain volatile in 2021E

Interstate Travel Ban Is Bad for Business

Due to the implementation of MCO and CMCO in most states in the Peninsular Malaysia, interstate travel has been banned. Although the government has mentioned that the current MCO and CMCO is effective till Jan 26, with rising cases, we believe there is a high likelihood that the interstate ban could last for more than a month, especially as we approach several festive seasons too. As a result, we have lowered our visitation forecast for GENM’s Malaysia operation by 8% to 23.7m from 25.8m (2019 visitation is at 28.7m). There is further downside risk to our forecast if the ban is extended beyond a month.

Gaming Revenue Normalised Post Reopening Hype

GENM’s New York casinos GGR have declined by 15%-25% mom since Oct 2020 (reopen in Sep 2020) and remain stagnant since. The decline has not come as a major surprise to us, as we believe the initial strong recovery was due to pent up demand after closing for 5 months. Gaming revenue for RW Catskill is down by 28% since Jan 2020, and RW New York is down by 35% since Jan 2020. Although the state of New York has started distributing the vaccine, it is currently only for essential workers and the high risk group, and hence herd immunity likely only by end of 2021. Likewise, we believe a similar situation could pan out for its Malaysian operations.

Reiterate SELL With a Lower TP of RM2.07

We have cut our EPS forecast for 2021 by 22.7% to factor in the lower visitation numbers due to the interstate travel ban, as we believe that the ban could last for more than a month. The cut in earnings is more severe due to the reduction in operating leverage. As a result, we have also lowered our RNAV-based TP to RM2.07 and maintain our SELL call, as we believe that earnings will continue to remain volatile due to fluctuation Covid19 cases. Malaysia is only likely to achieve herd immunity by end of 2021, in our view.

Source: Affin Hwang Research - 18 Jan 2021