- Genting Malaysia Bhd (GenM) has signed a licensing pact with 21st Century Fox for its outdoor theme park. The theme park will cost about RM400mil and is slated to open in FY16F.

- The revamped park will introduce some brands from Fox movies such as Ice Age, Alien and Night at the Museum. The theme park will cover 25 acres and feature more than 25 rides.

- Tan Sri Lim Kok Thay, CEO of GenM also said that GenM would be adding 1,300 rooms at “Resorts World Genting”. We think that this is part of the extension of First World Hotel. There is a possibility that there might be a new hotel block next to First World Hotel.

- We estimate capex for the new rooms to be between RM300mil and RM500mil. Cost of the theme park and new hotel rooms is expected to be captured under the RM3bil capex, which was announced earlier.

- The RM3bil capex would be spread out over five years.

- With additional 1,300 rooms, the number of rooms at “Resorts World Genting” would climb by 13% from 10,000 to 11,300. This would boost revenue as the number of visitors and mass market players would rise.

- We do not know if the additional rooms would be opened to public in phases. If the rooms are completed together, then we reckon that they would only open in FY16F, which is the same time as the theme park.

- In FY05, revenue of the leisure and hospitality division surged 23.6% led by capacity-driven demand. The number of hotel rooms at Genting Highlands increased from 6,900 in FY04 to 8,100 in FY05.

- The increase in mass market business might reduce the proportion of earnings contribution from high-rollers in the future. VIPs accounted for 37% of GenM’s gaming revenue in 1QFY13 versus 34% in FY12.

- We have assumed a capex of RM1.1bil in FY13F and RM700mil in FY14F. BUY GenM for its undemanding FY14F PE valuation of 13.4x and resilient casino operations in Malaysia and New York.

Source: AmeSecurities