KUALA LUMPUR (Sept 13): PublicInvest Research has left its forecasts and recommendation for Genting Bhd unchanged as it has yet to factor in any expectations for the bid for the Yokohama integrated resort project that was cancelled recently.
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PublicInvest maintained its “outperform” call on Genting with a target price (TP) of RM5.70.
Genting’s 52.7%-owned subsidiary Genting Singapore announced that Yokohama City published its decision to cancel the Yokohama integrated resort bid process on Sept 10. As a result, Genting Singapore’s participation in the bid was discontinued, said PublicInvest.
“This came after the city elected its new mayor, Takeharu Yamanaka, who campaigned against the Japanese government’s casino plans to boost the tourism industry,” said the research house.
To recap, Genting Singapore announced on June 11, 2021 that it was leading a consortium of local Japanese corporates and submitted a bid in response to Yokohama City’s request for a proposal for an integrated resort project.
This came after Japan legalised integrated resorts in 2018 as an attempt to boost the economy through tourism and hospitality.
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Nonetheless, PublicInvest believes that near-term catalysts for Genting would be the reopening of the Malaysian economy as well as stronger plantation earnings due to elevated crude palm oil (CPO) prices.
It said that earnings weakness of Genting is expected to persist for the group’s casino operations, particularly in Malaysia given the prolonged lockdown situation. But the research house sees that a complete reopening of the Malaysian economy, which is likely to happen once the country achieves herd immunity, will likely take place at year end.
Meanwhile, it opined that Genting Singapore would be able to deliver a better performance as the city state managed to curb the spread of Covid-19 better than its regional peers.
“All in all, we reckon investors should not be focusing on near-term earnings setbacks but towards a gradual improvement in 2022/23 with the eventual opening of international borders that will benefit the global tourism industry,” it said.
At the time of writing today, Genting was down 1.76% at RM5.01 per share. Year to date (YTD), the counter had gained 14% or 62 sen. Its market capitalisation stood at RM19.7 billion. -The Edge Markets