Highlights

There will be some slight delay in the opening of Resorts World Bimini Bay (RWBB), a 10,000 sq ft casino deal between GenM and RAV Bahamas, which is now slated to commence operations in mid-2013 (initially Dec 2012).

Given the relatively small casino area, RWBB will be having approximately 30 table games and 100-150 slot machines. The composition of slots and table games is rather small compared to most of the available casinos in the Bahamas.

We made some calculations on the potential revenue and EBITDA, which we arrived at a conservative range of US$8.9-10.3m and US$3.8-5.0m p.a. respectively, based on net win/machine/day in both Florida and Bahamas (refer next page for detailed calculations).

As this development is a JV with the resort owner, it is not known yet whether the revenue will be split between both parties or to be 100%-owned by GenM. Assuming GenM takes 100% of the revenue and pays rental to RAV Bahamas, RWBB will only contribute 1.2-1.6 sen to GenM’s fair value.

Despite the insignificance, we remain positive on the group as we see GenM’s efforts in expanding its international coverage by continuously exploring potential opportunities.

The casino could attract more visitors (especially from South Florida), making Bimini Bay a distinctive destination. Since the destination resort bill will be put on hold for the year, this development will indirectly help promote and strengthens GenM’s foothold in the region.

This is strengthened by Bahamas’ Prime Minister Perry Christie’s announcement on GenM’s increased involvement in the island whereby the group will be spending ~US$100m (RM308m) in acquiring a high-speed luxury cruise ship and jet aircraft to provide dedicated transportation to Bimini.

We believe this would not be a problem as Genting group has the expertise, where it owns 50% of Norwegian Cruise Line. And with such plans in hand, we believe it will bring more business into the tiny island and make RWBB successful.

Risks

1) Regulatory risk; 2) Weaker hold percentage; 3) Pandemic breakouts; 4) Cannibalization from Macau & Singapore; and 5) Appreciation of RM; and 6) Full-fledged casino proposal not approved.

Forecasts

Unchanged, as contribution from RWBB will be very minimal at 1.2% of GenM’s FY13 EBITDA.

Rating

BUY

• Positives – (1) Defensive stock; (2) Monopoly in the industry; and (3) New source of earnings from international markets to drive earnings growth
• Negatives – (1) Highly regulated industry; and (2) earnings highly dependable on luck factor and hold percentage

Valuation

• Maintain BUY on GenM with unchanged TP of RM4.10 based on SOP valuation.

Source: Hong Leong Investment Bank Research - 09 Apr 2013