KUALA LUMPUR: Sentiment on Genting Malaysia Bhd stock should recover as the gaming tax hike overhang has been lifted, said RHB Research.
While it did not foresee any such hike in the 2020 Budget in the first place, RHB Research said the street’s concerns on the matter had been present since the unexpected steep gaming tax hike in the previous budget.
The firm noted that Genting Malaysia management expects Empire Resorts to be EBITDA-positive by financial year 2020, ahead of street and its estimates.
“While the acquisition of Empire Resorts has raised some environmental, social and governance concerns, investors should look beyond this related-party transaction, which is ultimately a non-core joint venture asset.
“Instead, the focus should be on Genting Malaysia’s core business in Resorts World Group, which contributes 80 per cent of group EBITDA.”
RHB Research said Resorts World had repeatedly showed its capability in cushioning the gaming tax hike impact and beating street estimates over the past two quarters.
Its strategy to focus on the premium mass market over high rollers will continue to mitigate the tax hike impact.
“Visit Malaysia 2020 and the opening of its outdoor theme park (slated to open by the third quarter of 2020, if not earlier) should be earnings growth drivers ahead,” the firm added.
RHB Research reiterated its “buy” call on Genting Malaysia with a target price of RM3.90, which represents a 27 per cent upside.