Genting Malaysia Berhad (GENM) is expected to deliver improved quarterly results for 2Q24, buoyed by a significant uptick in tourist arrivals. The company's Malaysian operations are forecasted to show both quarter-on-quarter and year-on-year growth, driven by robust tourism figures. Recent data reveals that Malaysia welcomed 6.0 million tourists in 2Q24, marking a 26% increase from the previous year and a 3% rise from the preceding quarter. This surge includes a notable rebound in Chinese tourists, whose numbers reached 690,000, compared to 320,000 in 4Q23. Additionally, arrivals from Singapore, Indonesia, and India saw increases of 10%, 25%, and 87% year-on-year, respectively.
Analysts have highlighted GENM as a prime investment choice for those seeking exposure to the tourism sector's rebound with an ADD rating call. With a current price-to-earnings ratio of 13.0x for CY24F and a dividend yield of approximately 6-7%, GENM's valuation is considered attractive. Analysts anticipate that the improved economic activity and ongoing recovery in tourism will continue to support GENM's earnings growth throughout FY24F. The company's operations in the US have also shown positive signs, with a 3.1% increase in gross gaming revenue year-on-year for the latest quarter.
For the remainder of 2024, economic conditions in Malaysia are expected to favour continued growth. The government's initiatives, including cash handouts to low-income households and higher civil servant salaries from 2025F, alongside anticipated increases in private consumption and tourism, are projected to bolster GENM's revenue. The Ministry of Tourism, Arts, and Culture forecasts tourist arrivals to reach 27.3 million in 2024, generating an estimated RM102.7 billion in income, up from RM71.3 billion in 2023.
Despite concerns surrounding potential regulatory issues affecting GENM's New York casino licence bid, analysts have maintained a positive outlook. The company's SOP-based target price remains at RM4.00, reflecting a 42% compound annual growth rate (CAGR) in earnings per share over FY22-25F. Although there are uncertainties related to the Nevada gaming regulator's complaints, the forecast does not account for potential gains from the New York casino project, focusing instead on GENM's existing assets.
Source: CGS
Title: Higher tourist arrivals likely lifted 2Q24F