Genting Malaysia to benefit from SkyWorlds ramp up, weak currency

Genting Malaysia’s 1Q22 results were lower-than-expected, though analysts forecast better times ahead as visitation to its new theme park picks up and the weak local currency helps to pull in tourists.
The Malaysian operator, which also has operations in the U.S., U.K, Egypt and the Bahamas, last week posted a wider-than-expected adjusted net loss of MYR100 million ($22.8 million), compared with a profit of MYR296 million in the fourth quarter of last year.
Analysts have attributed the underperformance to slower visitation in Malaysia due to Omicron, especially in March, while the operator is also seeing higher costs as it ramps up operations. The results were sequentially weaker both in Malaysia and its overseas businesses.
Genting Malaysia, which derives the majority of its revenue from its domestic operations, opened its delayed SkyWorlds theme park in February this year, which analysts expect to be a key driver of visitation to the property.
The park is the centerpiece of the MYR10.38 billion ($2.46 billion) Genting Integrated Tourism Plan, which adds new hotel rooms and facilities to Resorts World Genting (RWG). It also increased the size of the casino floor. The initial investment was slated to be MYR5 billion, though the company announced it had doubled its spending plans in 2016.
The $800 million theme park is spread over 26 acres and has nine themed zones. It is ultimately expected to feature 26 attractions.
However, the ramp-up of the theme park has been slower-than-expected, with only 75 percent of offerings currently open.
Analysts at CGSCIMB expect visitation will pick up in the second half of the year as more attractions come online. 
The firm is expecting 1.5 million visitors this year, rising to 2.3 million next year and 2.5 million in 2023. But it warns that the high start up costs will mean that there is likely to be a hit to Genting’s pre-tax profit of MYR174 million this year, and MYR58 million next, before beginning to boost earnings from 2025. 
HongLeong Investment Bank cut its forecasts for this year by 34.9 percent and next year by 3.8 percent following the 1Q22 miss. However, analyst Tan Kai Shuen remains upbeat about Genting Malaysia’s prospects. 
The bank has raised estimates for its target share price to RM3.91 from RM3.69.
“We continue to like GenM as we view RWG as one of the prime beneficiaries with borders reopening, especially with the addition of the theme park that complements its gaming attraction, making it an attractive tourism spot that could capture visitors from all walks of life,” Tan said.