Maybank Investment Bank’s recent decision to reduce its 2024 earnings forecast for Genting Malaysia by 15% has drawn attention to the impact of the closure of two gaming floors at Resorts World Genting (RWG) for renovations. This move is expected to dent the mass gaming revenues of the company’s flagship Malaysian property. Analysts anticipate a recovery post-renovation, particularly during the holiday season.
Impact of Renovation Closure on Earnings Forecast:
Maybank IB analyst Samuel Yin Shao Yang highlights the anticipated decline in mass market gross gaming revenue (GGR) during 2024 due to the closure of Circus Palace and Hollywood gaming floors. Yin’s assessment suggests that the renovation period will see a reduction in gaming activity, affecting earnings. However, he projects a rebound in earnings from 2025 onwards, contingent upon the timely reopening of the renovated gaming floors by the end of the year.
Observations and Insights from Recent Visit:
Yin’s recent visit to RWG revealed some noteworthy observations. Despite the closure of key gaming floors, operational areas like the Sky Casino exhibited surprising levels of patronage, particularly evident during weekdays. The influx of Chinese tourists, indicated by their accents, suggests continued gaming participation, albeit in different sections of the resort. The removal of “NO SMOKING” signs at tables also hints at potentially positive outcomes for table yields, enhancing the gaming experience for patrons.
Migration of Business to Sky Casino:
Yin’s analysis estimates that 50% of the mass gaming business from the closed Circus Palace and Hollywood gaming floors will shift to the Sky Casino. This migration pattern leads to a revised downward forecast for mass gaming revenue at RWG by 19%, resulting in an overall impact of 15% on Genting Malaysia’s FY24 earnings. Despite this short-term setback, there is optimism regarding the eventual recovery post-renovation.
Historical Perspective and Future Projections:
Drawing from historical data, Yin emphasizes the tendency for RWG’s GGR to grow following expansions or renovations of gaming floors. This historical trend underpins his confidence in maintaining earnings projections for FY25 and FY26, with expectations of RWG’s total GGR recovering to 104% and 106% of FY19 levels, respectively. Such projections rely on the premise of renewed gaming activity and improved facilities post-renovation.
The decision by Maybank Investment Bank to revise Genting Malaysia’s earnings forecast underscores the short-term challenges posed by the closure of gaming floors for renovations at Resorts World Genting. However, insights from recent observations, coupled with historical patterns, provide a cautiously optimistic outlook for the company’s future performance. While FY24 may witness a dip in earnings, the anticipated rebound in subsequent years suggests resilience and growth potential for Genting Malaysia, particularly as RWG aims to capitalize on renewed infrastructure and improved gaming facilities.