Genting stock surges as lockdowns ease
Gambling and hotel firm to retrench its operation with major job cuts
The 55th year of Genting Berhard’s existence has thus far proven to be a tough one. The widespread lockdowns imposed to limit the spread of the novel coronavirus severely affected the gambling and hotel firm, which was already struggling with mounting costs.
In 2019 the company’s total costs and expenses before finance costs added up to RM9.1bn ($2.1bn, £1.7bn). At the same time its total employee wages and benefits increased from RM2.2bn in 2018 to RM2.3bn.
The government-mandated closure of its casinos and hotels added to this already strained situation. In the first quarter of 2020, Genting suffered a net loss of RM417.9m, down from the RM268.2m profit it saw at the start of 2019.
This dire situation has forced the company to begin a severe retrenchment. It is now expected to cut its global workforce of 20,000 people by between 10 to 20 per cent.
To rub salt into the Asian gaming giant’s wounds, Standard & Poor’s has trimmed its credit rating from BBB+ to BBB, expecting business to remain sluggish even when nations fully reopen.
Genting itself would seemingly share this sceptical outlook. In an internal memo to employees the company said: “When business operations resume, we will face challenges to regain the level of business our company saw prior to the pandemic.”
Luckily for Genting, however, others are more bullish, believing that punters will flock back to the card tables and slot machines when finally released from quasi house arrest.
Maybank IB Research for example, stated: “We are turning more positive, as the number of new Covid-19 cases and deaths in Malaysia, New York State and the United Kingdom is easing. Thus, we anticipate GENM’s casinos will reopen soon, drawing a line under [the] current negative earnings revision trend, and refocusing investors on [the] overly discounted valuation and attractive dividend yield.”
Such a positive viewpoint has arguably been borne out by the fact that, with governments around the world relaxing restrictions day by day, Genting stock closed up 10.75 per cent in Monday trading, to stand at RM4.43.
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