- According to news reports, Genting Malaysia Bhd’s (GenM) Outdoor Theme Park will be closed for two years to undergo a major facelift.

- The multi-million ringgit playground, which is one of the amusement parks in the area is expected to close from 1 September 2013 onwards.

- It is business as usual in the other two amusement parks ie Indoor Theme Park and Snow World.

- The Outdoor Theme Park has more than 20 rides. GenM will be making an announcement next week on the new direction for the theme park.

- The closure of the Outdoor Theme Park would not affect GenM’s earnings significantly. - This is because the bulk of GenM’s profits are generated by the casino division.

- We estimate that non-gaming activities account for 20% of the leisure and hospitality division’s revenue in Malaysia.

- Including contribution from UK and New York, we estimate that non-gaming activities in Malaysia account for less than 10% of group revenue. The leisure and hospitality division in Malaysia accounted for 89% of GenM’s EBITDA in FY12.

- We view the facelift for the Outdoor Theme Park positively. New rides would allow GenM to attract more visitors and encourage higher spending per visitor. This would improve the revenue yields of the group.

- We believe that the capex for the outdoor theme park would be included under the RM3bil facelift announced by the group recently. For FY13F, we have assumed a capex of RM1.1bil.

- We maintain BUY on GenM for its undemanding valuations as reflected in its FY14F PE of 13.1x.

Source: AmeSecurities