• China visitors to RWG were almost back to pre-Covid 2019 levels in 4Q24, with more high-yielding tourists than lower-yielding tour groups.

• In our view, the reopened casino floor area should prove timely to cater for increase in gaming volume and visitors leading up to the CNY period.

• At 12.4x CY25F P/E and 4.3x CY25F EV/EBITDA, we think valuations are undemanding with strong FCF generation and attractive dividend yields.

Robust tourism recovery at RWG supports earnings recovery thesis

Genting Malaysia (GENM) participated in our 2025 Malaysia Corporate Day (MCD) on 7 Jan 2025, where it shared that visitor footfall to Resorts World Genting (RWG) continued to improve in 4Q24, especially with visitors from China almost recovering to pre-Covid 2019 levels during the year-end festive season. GENM seeks to continue capitalising on: i) the visa-free exemption for Chinese tourists until 2026, ii) increased airline capacity and flight frequencies from China to Malaysia, and iii) various incentives and programmes undertaken by the Ministry of Tourism leading up to Visit Malaysia Year 2026 to attract higher yielding China visitors to RWG. In conjunction with its 60th anniversary, RWG will also be having more activities and promotions to drive even more footfall to its facilities.

Timely reopening of casino a positive boost leading up to CNY

GENM also shared that it had reopened a substantial portion of the Genting Casino area at RWG, which caters to the mass market. The reopened mass market area now incorporates more digitalization, with the rollout of electronic table games (ETG) with smaller bet sizes to attract younger visitors and to control manpower costs. We view this as a positive development as GENM would be able to cater for the increase in gaming volume stemming from the increase in visitors leading up to Chinese New Year (CNY), providing support to 1Q25 earnings while managing manpower costs.

Reiterate Add with an SOP-based TP of RM3.65

We retain our Add call as we see a robust 3-year EPS CAGR of 42% in FY23-26F, supported by the recovery in tourism and growth in RWG’s revenue. GENM currently trades at 12.4x CY25F P/E, more than 2 s.d. below its historical pre-Covid-19 mean P/E of 18x. With an improved earnings performance and FCF generation, we believe that GENM should be able to maintain a FY24F DPS of 15 sen (2H24F DPS: 9 sen), which is equivalent to an interim dividend yield of 4% and FY24F dividend yield of 6.8%. We believe that the key overhang on GENM’s share price stems from the complaint by RAV Bahamas Ltd (RAV) against Genting Americas Inc (GAI), which could affect GENM's bid for a downstate casino licence in New York. However, this does not affect our valuation as we have not factored in any potential upside from its New York casino bid. Key re-rating catalysts are stronger than-expected Malaysian operations and operating margins. Downside risks are higher than-expected operating costs and slower Malaysia tourism recovery affecting RWG.

Key Beneficiary of Robust Tourism Recovery

Other Key Takeaways

• Despite an increase in SST from 6% to 8% in Apr 2024, GENM has been able to hold 9M24 EBITDA margins at 31% by finding costs savings elsewhere. GENM expects a long run EBITDA margin for RWG to be sustainable around 31-32%.

• In 9M24, RWG recorded 21m visitors with 74% being day trippers. Singapore visitors were back to pre-Covid levels at c.910k guests in 9M24 (+15% yoy) while Chinese visitors in 3Q24 reached 114k (2Q24: 97k, 3Q23: 44k).

• For its UK operations, GENM has been focused on closing unprofitable clubs and focusing more on the mass market which has provided more stability and yield. Moving forward, GENM plans to stay focused on markets that provide better yields as well as expand in more profitable areas.

• Management expects Resorts World Bimini to continue to improve from EBITDA breakeven with its focused cruise strategy. GENM reiterated its stance that it believes that the complaint by RAV against GAI is baseless and without merit, and will continue to defend against these claims, with a court decision expected by the middle of 2025.

• Empire Resorts remains an important asset for GENM with the synergies that can be achieved if GENM obtains one of the downstate casino licences in New York. There are plans in place to improve its earnings performance which includes reviewing the game mix as well as optimising operating hours and manpower costs.

• Some of the key focus areas by the New York Gaming Facility Location Board included job creation, community support and facilities. We believe that if GENM is successful in its bid, it would have an advantage with the speed to market as it already has existing land, hotel, trained staff and space allocated at Resorts World New York City to be operational within 1-2 years, as compared to 3-5 years for a greenfield casino operation. Tentative key dates include bid application deadline on 27 Jun 2025, Community Advisory Committee vote deadline on 30 Sep 2025, New York Gaming Facility Location Board decision by 1 Dec 2025 and licences to be given out by 31 Dec 2025.

• While there is an interest in Thailand’s gaming market, many details have yet to be announced such as how many licences would be issued, investment costs and duration of the licences, among others. We believe that while GENM remains focused on the New York downstate licence bid, it will continue to keep an eye on developments in Thailand.

Source: CGS-CIMB Research - 13 Jan 2025