The research firm said it anticipated lower casino volume of 17-18% year on year (y-o-y) at Resorts World Genting (RWG) fewer visitors are expected in 2Q20 due to social distancing even post-MCO.
PETALING JAYA: CGS-CIMB is slashing Genting Malaysia Bhds’ core earnings per share (EPS) of the company by 43% following the extension of the movement control order (MCO).
The research firm said it anticipated lower casino volume of 17-18% year on year (y-o-y) at Resorts World Genting (RWG) fewer visitors are expected in 2Q20 due to social distancing even post-MCO.
In a report, it cautioned that further MCO extension “may hit FY20 forecast earnings.”
Due to the pandemic, Genting Malaysia has temporarily closed its Malaysian, US, Bahamas and UK operations.
CGS-CIMB said it assumed a full recovery in RWG casino volumes to pre-MCO levels only in the second half, supported by tourism incentives and the opening of the outdoor theme park (OTP).
Its forecasts include a 3% cut in staff costs to account for 15%-20% salary cuts from April-June for employees in positions of assistant managers and above, partly offset by new hires for the OTP.
“FY21/22 forecast core EPS is raised 3.7%/3.4% for housekeeping reasons. Post revisions, we see FY20 forecast core EPS falling 73.4% yoy, then rising 200.4%/15.3% yoy in FY21/22F, ” it said in a report yesterday.
If the MCO is extended by a further 14 or 28 days till May 12 or 26, the research said, “base-case FY20 forecast for RWG casino volume will be reduced by 4%/7% and core EPS by 21%/43% with lower dividend per share (DPS) of 4.8/3.5 sen.”
But fair value will fall by only 1/2 sen given the relatively short extension duration, CGS-CIMB said.
In the event, the impact from Covid19 and social distancing is more severe than expected and RWG’s casino volumes fall by a larger 20%/25% yoy, the research firm said its FY20 forecast core EPS will drop 22%/60%, with DPS at 4.8/2.5 sen.CGS-CIMB reiterated its “add” call on the stock, but with a 3% lower target price of RM2.80.
https://www.thestar.com.my/business/business-news/2020/04/24/genting-malaysia-earnings-forecast-slashed
