• Keep BUY and SOP-derived MYR3.45 TP, 21% upside and c.5% yield. We recently visited Resorts World Genting (RWG) on a Wednesday afternoon to check on the footfall, and were pleasantly surprised by the casino crowd, despite the theme parks and malls being relatively empty. However, we understand the hotel rooms have been fully booked for most weekends. While we expect continued recovery in the number of visitors to RWG, we are cognisant of the effects of inflation, which pose a downside risk to gaming and non-gaming revenue.

• The casino crowd is back! We were pleasantly surprised by the crowd in the casino on a weekday afternoon. While we estimate that c.25% of the tables were still empty, some of the most popular tables had more than 50 patrons gathered around it. However, outside the casino, the SkyAvenue mall and High Line (bar street) were quite empty in the afternoon, but footfall seemed to have gradually risen later in the day. We also gather that all of the c.5,000 hotel rooms (out of the 10,500 total hotel rooms at RWG) opened have been fully booked for the weekends.

• Theme parks. We did not see a long queue at the SkyWorlds outdoor theme park. We gather only 15 out of 20 rides were open at the moment, with three slated to open by the end of this year. At the Skytropolis indoor theme park, there was seemingly a larger crowd but most rides had short queues while the others were empty.

• Continued recovery in footfall. Given the borders of neighbouring countries have opened, we think Genting Malaysia will likely ramp up efforts to attract tourists from around the region. That said, we note that historically, more than 80% of RWG's visitors have been domestic tourists. With a decent crowd on a weekday afternoon, we think that RWG should see higher footfall on the weekends and holidays, especially as SkyWorlds continues to draw many first timers. However, we are cautious on the impact of inflation on GENM's recovery, as we think that it could reduce the number of gaming and non-gaming visitors, as well as reduce the drop per person, especially for the mass market segment.

• Current share price undervalues GENM’s recovery; Keep BUY. We make no changes to our forecast and our MYR3.45 TP, which includes an 8% ESG discount. We maintain our BUY call premised on the continued earnings recovery from the return of gamblers and tourists. Despite the higher number of tourists and an evident return of gamblers so far in 2022, GENM’s share price is still hovering around the level seen throughout most of 2021, when activity was evidently lower due to the various lockdowns.

• Key risks: Slowdown in COVID-19 recovery, changes in luck factor, and regulatory risks.

Source: RHB Research - 6 Jul 2022