GEN Malaysia revenue to 2019 level only in 2022: Nomura

Apr 23, 2020 Newsdesk Latest News, Rest of Asia, Top of the deck  

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Annual revenues at casino operator Genting Malaysia Bhd might not return to 2019 levels until 2022 via a “tick-shaped” recovery, as a result of the shock of the Covid-19 pandemic. So says a Thursday memo from banking group Nomura.

The institution noted, citing the casino firm’s data, that 2019 group revenue had been just under MYR10.41 billion (US$2.38 billion). The institution thinks the group’s revenue will return to MYR10.19 billion only by 2022.

“There is still uncertainty on how much longer lockdown measures, travel restrictions and strong social distancing norms will remain,” wrote analysts Tushar Mohata and Alpa Aggarwal.

A notice posted on the website of the group’s flagship property – Resorts World Genting (pictured) – currently says that a shutdown of operations that initially began on March 18 is in place until April 28.

Regarding the overheads borne by Genting Malaysia during the crisis, the institution said “roughly 30 percent of cash costs are fixed, but management is attempting to bring them down”. Nomura cited pay cuts flagged across parts of the Genting group as an example of such discipline.

Genting Malaysia has operations in the United States, the Bahamas, the United Kingdom and Egypt, as well as its core venue at Genting Highlands, Malaysia’s only licensed casino resort.

The Malaysian resort had a “bigger dependence on the domestic market, with more than 70 percent of guests being day trippers, as well as  more than 70 percent of visitors being Malaysians,” said the Nomura analysis. That suggested “some pent-up demand can return as soon as the lockdown is eased even if international borders remain closed,” Nomura added.

A number of industry commentators have suggested Asian casino markets will emerge from anti-coronavirus lockdown before the United States. Genting Malaysia has majority-owned operations in New York state, one of the U.S. places hardest-hit by Covid-19.

“International business will be hit more severely due to locations being hit hard by Covid-19 (New York and U.K.),” wrote Nomura.

The institution forecast that – assuming market recovery starts this year – 2020 group revenue would be just under MYR4.38 billion, about half that of last year. It thinks that of the 2020 total, about 72.9 percent, or MYR3.19 billion, will be generated by the Malaysian property. The brokerage is now forecasting Genting Malaysia to report a net loss of nearly MYR1.1 billion this year, returning to profit in 2021. The casino operator reported a net profit of just below MYR1.40 billion in full-year 2019.

Nomura thinks 2021 group-wide revenue for Genting Malaysia might be nearly MYR8.52 billion, with just under 70 percent, or MYR5.96 billion, coming from the Genting Highlands operation.

“Overall, we now build in a ‘tick’-shaped revenue trajectory,” with full year 2020, 2021 and 2022 revenue estimates at respectively “42 percent, 82 percent and 98 percent of 2019 figures, as tourist confidence returns slowly,” said the analysts.

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