Genting Malaysia Bhd (GenM) is set to see improvements in its financial performance with the partial reopening of its Hollywood Casino at Resorts World Genting, located in the highlands of Genting. According to Phillip Capital Research, the company has restarted operations in less than a third of the former Genting Casino’s floor space, with plans for a continued expansion leading into the Lunar New Year period.

Partial reopening of Resorts World Genting’s casino floors:

The overall casino area, commonly referred to as Genting Casino, is made up of two distinct sections: Genting Casino 1, also known as Circus Palace, and Genting Casino 2, or Hollywood. Currently, only Genting Casino 2 is operational and open to the public, catering primarily to the mass market. Meanwhile, a significant portion of Genting Casino 1 remains closed, though work is underway to complete additional gaming space in time for the upcoming festivities.

According to The Star, Phillip Capital’s recent report noted that although they were unable to precisely measure the area, they estimated that less than one-third of the total floor space of both casinos is currently accessible. The firm believes that more floor space could be brought online as the Lunar New Year approaches, potentially offering a boost to both the casino’s capacity and Genting Malaysia’s financial performance.

The reopening of the casino floor is a critical development for Genting Malaysia, as it anticipates a surge in demand during the festive season. Phillip Capital observed that the company is prioritizing the completion of additional space in preparation for the Lunar New Year when gaming activity typically peaks.

While the reopening has been gradual, there are expectations for further expansion in the near future. Phillip Capital outlines two possible scenarios for the casino’s future operations: first, that both Genting Casino 1 and 2, along with their connecting areas, could progressively reopen, restoring roughly half of the casino’s previous capacity; or second, that the status quo will remain, with only Genting Casino 2 continuing to operate at full capacity.

Despite the partial reopening, the timing aligns with an increase in gaming activity, and the company remains focused on improving its offerings for the holiday season. This strategy could help bolster Genting Malaysia’s financial outlook, even as the company navigates a variety of challenges in other regions.

Mixed results from Genting Malaysia’s U.S. portfolio:

While Genting Malaysia’s operations in Genting Highlands are showing promise, its U.S. operations have not been without their difficulties. Phillip Capital reports that GenM’s U.S. properties, which contribute between 17% and 20% of the company’s pre-tax profits, continue to face challenges.

In particular, Resorts World Catskills, a New York-based casino owned by Empire Resorts, saw only a modest 1% year-on-year increase in gross gaming revenue (GGR) for the fourth quarter of 2024 (4Q24). However, this growth was offset by an 11% quarter-on-quarter decline due to seasonal factors. In total, the casino’s GGR for the year fell by 2%, reflecting the pressures of the competitive gaming environment in the U.S.

In contrast, the company’s video lottery terminals (VLT) in New York, which include Resorts World New York City and Resorts World Hudson Valley, saw more favorable results. These facilities recorded a 5.1% year-on-year net win growth in the fourth quarter of 2024, although this was slightly behind the 5.7% overall growth rate seen across New York state. On a more positive note, the VLT facilities outpaced the state’s industry-wide growth for 2024, achieving a 4.1% year-on-year increase. This growth has helped Genting Malaysia gain a 43.5% market share, up from previous levels.

Phillip Capital has maintained its “BUY” recommendation for Genting Malaysia, with an unchanged target price of RM3.30 per share. The research house’s updated earnings forecast for 2024 to 2026 reflects a slight increase of 2-4%, driven by favorable adjustments in foreign exchange assumptions and a reduction in the corporate tax rate. However, these gains are tempered by higher-than-expected losses from associates, particularly those linked to Empire Resorts.

Despite challenges in the U.S. market, the potential for Genting Malaysia to secure a downstate New York City casino license by the end of 2025 remains a key catalyst for growth. If successful, this move could significantly enhance the company’s revenue streams and provide a positive re-rating for its stock. However, risks remain, including the potential for lower-than-expected win rates, increases in gaming taxes, and setbacks in the performance of key associates.