GGRAsia – China full reopening 2024 at best, Genting to gain: analyst

China full reopening 2024 at best, Genting to gain: analyst

Nov 10, 2022 Newsdesk Latest News, Rest of Asia, Singapore, Top of the deck

Malaysia’s Genting group is likely to be among the beneficiaries in the event of a full reopening of China’s borders that enabled resumption of outbound tourism by mainland China residents. That is according to a report by Maybank Investment Bank Bhd issued on Wednesday.

The Genting group controls Genting Malaysia Bhd. The latter firm has a casino monopoly in its home market via the Resorts World Genting complex, and runs casinos in the United States, the Bahamas, the United Kingdom and Egypt. The Genting group also operates a casino resort in Singapore, via Genting Singapore Ltd.

Maybank analyst Samuel Yin Shao Yang wrote in Wednesday’s report that, while China’s central government “has repeatedly stated that it will maintain its ‘dynamic’ zero Covid-19 policy, we cannot help but notice that China is reopening its borders albeit gradually”.

He added: “We believe that the reopening will be gradual and the return of mass outbound tourism to 2019 levels will only be realised in 2024, at earliest.”

The report by Maybank suggested that such return of outbound tourism by mainland Chinese could lead to an increase of 8 percent – or MYR102.1 million (US$21.7 million) – in annual earnings for Genting Malaysia in 2024.

According to Maybank, visitors from mainland China had not been crucial to Genting Malaysia pre-Covid-19. The institution estimates they accounted for only 1 million – or 4 percent – of total visitor arrivals to Resorts World Genting in 2019.

“That said, there could be more upside should Genting Malaysia win a Macau gaming concession and Macau is allowed to fully reopen its borders [to visitors from mainland China]”, wrote Mr Yin.

GMM Ltd, a Macau-registered company linked to Genting Malaysia, is one of seven contenders for only six new 10-year Macau gaming concessions. GMM is up against the bids made by the six incumbent gaming operators. The Macau government has said it hopes to start the new concession term on January 1, 2023.

Gradual reopening

Maybank’s Mr Yin wrote that it was likely mainland China would “undergo a massive booster vaccination drive before it reopens” its borders fully. In addition, it was likely that mainland China would “not reopen all its airports to international travel initially lest Covid-19 spreads uncontrollably”, he said.

“We believe that China will not hesitate to re-lockdown cities and airports should Covid-19 spread in a particular city”, Mr Yin cautioned.

Looking at Genting Singapore, Mr Yin wrote: “Under a ‘blue sky’ scenario where Resorts World Sentosa full-2024 mass market gross gaming revenue (GGR) recovers to 100 percent of 2019 levels driven by the return of Chinese tourists, our full-2024 earnings estimate for Genting Singapore could be lifted by 12 percent [to SGD713.3 million (US$508.9 million)].”

Maybank highlighted that it did “not expect many [mainland] China VIPs to return to Singapore due to China criminalising cross-border gambling.” China’s amended criminal code, that outlaws anyone assisting in cross-border gambling, came into effect from March 1, 2021.

The investment bank stated that in 2019, prior to the emergence of Covid-19, “[mainland] Chinese VIPs accounted for 30 percent to 40 percent of Resorts World Sentosa’s VIP volume, and [mainland] Chinese visitors accounted for circa one-third of Resorts World Sentosa’s mass market GGR.”

Analyst Mr Yin also highlighted that the Genting group controls the Resorts World Las Vegas casino resort in Nevada, in the United States. That property too could benefit from a full reopening of China’s borders.

“Resorts World Las Vegas is Asian-themed, and nearby Wynn Las Vegas was extremely popular with Chinese VIPs pre-Covid-19,” Mr Yin noted.