• We cut our earnings estimates for 2021 by 18.6% to factor in the prolonged travel ban in Malaysia and also the operating losses of the upcoming Resort World Las Vegas (RWLV), which is slated to open in June
• Given that the Las Vegas market has remained stagnant for the past few years, we believe that RWLV would need to sacrifice some margin in the first few years to gain market share
• However, we have kept our RNAV-based TP at RM4.83, and our HOLD call unchanged, as the operating environment for its gaming subsidiaries would likely remain challenging for the next few years

Interstate travel ban in Malaysia is expected to extend to at least end of May

We have reduced the contribution from its Malaysia subsidiaries, as we believe that the current interstate travel ban is likely to last to at least end of May, with more than 60% of the population in Peninsular Malaysia under the ban. Although the new outdoor theme park is still slated for opening by mid-2021, we believe that the incremental visitation growth would still be limited, as current social distancing requirement will still be in place, and both the theme park and casinos are unlikely to operate at full capacity. Despite the vaccination program having already started, Malaysia would only likely be able to achieve herd immunity by end of 1Q22, based on the current vaccination run rate.

Las Vegas Market Is a Challenging One

We believe that Resort World Las Vegas (RWLV) is likely to operate at a loss for the first few years after its opening in June 2021, as they would need to sacrifice margin in order to build its customer base. The Vegas operating environment is different from other Asia casinos, as more than 75% of its revenue are driven by non-gaming facilities. With overall visitation remaining stagnant at around 42.5m over the past few years, RWLV would need to take market share from others to grow. Although the novelty effect might help to attract some crowds, the impact is also likely limited, given that there are a few new properties which have only opened their doors in the past 2-3 years.

Maintain HOLD With An Unchanged TP at RM4.83

We have reduced our earnings for 2021E by 18.6% to factor in lower contribution from the Malaysian operations and also losses from the upcoming RWLV. We have kept our HOLD call and TP at RM4.83 unchanged, as we believe investors are likely to look past the struggles in 2021. However, the upside is likely capped given that we are only expecting a full recovery by the end of 2022.

Source: Affin Hwang Research - 27 Apr 2021