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KUALA LUMPUR (Sept 22): RHB Research Institute said the worst is over for Genting Malaysia Bhd (GenM) as it believes the group’s “current valuation is attractive to position for a cyclical recovery”.

The research house has maintained its ‘buy’ call for the group, with a target price of RM2.59 which is a 23% upside to the stock’s current price of RM2.11.

“We recently visited Resorts World Genting (RWG), and the significant improvement in visitor arrivals seen reaffirms our positive view on the pace of recovery post reopening.

“The gradual relaxation of social distancing rules was apparent at the casino, with three to four standing guests now allowed to place bets, in addition to those from seated guests,” said RHB Research analyst Loo Tungwye in a note today.

With international borders still closed, Loo said that RWG will benefit from domestic tourism, as Malaysians can only travel within the country.

“We believe the pace of recovery will further accelerate with the gradual relaxation of the social distancing rules and the potential discovery of a vaccine,” he said.

“Management previously guided that daily visitor arrivals have increased by 50% since reopening,” he added.

Loo believes GenM has reached its inflection point, where almost all of its facilities have reopened, boosted by encouraging business recovery.

“As the world moves closer to a potential COVID-19 vaccine, GenM is a clear beneficiary of a cyclical recovery. This stock is still trading at a trough valuation of 5.5x FY21F EV/EBITDA, i.e. at a >50% discount to its regional peer average of 12x,” the analyst noted.

Loo added: “Furthermore, GENM’s generous dividends (5% yield) will serve as a support to the share price, and continue to reflect its sturdy balance sheet”.

He, however, highlighted some risks related to his call that include slowdown in COVID-19 recovery, changes in luck factor as well as regulatory risks.

At the time of writing, shares in GenM had risen two sen or 0.95% at RM2.13, bringing its market value to RM12.6 billion.


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