News

Genting Malaysia (GenM) announced that Resorts World Bimini (RWB) has started operations after its launch last Friday, 28th June 2013.

Concurrently, it also launched its brand new Bimini SuperFast, a 32,000-ton cruise ship that will sail the roundtrip between Miami and Bimini twice daily.

Highlights

The opening is in-line with our expectation of mid-2013, slight delayed from initial plan in Dec ’12.

The launch of the boutique casino in the country is part of the group’s growth strategy in the State. This further affirms our earlier view that the casino development will take the role of exposing the Americans in Florida area to casino gaming, as RWB is located nearest to South Florida.

The 750-acre luxurious beachfront resort contains villas, accommodations, restaurants, a fisherman’s village with shopping and dining options and other resort amenities, as well as the largest marina in the Bahamas.

However, the casino will only feature on a 10,000 sq ft area, consisting of circa. 30 table games and 100 slot machines. The composition of slots and table games is rather small compared to most of the available casinos in the Bahamas.

We have earlier made some calculations (Figure 1) on several assumptions based on the casinos available in Bahamas (refer to report dates 9 Apr ’13 titled Bimini Coming Into Action), and concluded that the relatively small casino will only contribute marginally to GenM’s fair value (~1.2-1.6 sen/share). This is assuming that 100% of the casino winnings goes into GenM’s account. Do note that RWB is a joint development between GenM and RAV Bahamas Limited, the developer of the resort.

Over on Bimini SuperFast, the cruise ship is expected to be able to transport up to 1,500 passengers to the new casino. En route the ship will offer craps, roulette and sports betting, which are prohibited in Florida.

The first trip is scheduled to leave at 9 a.m and returning at 7 p.m, and the second “Night Party Cruise” leaving at 9 p.m and returning at 5 a.m. Ticket fare starts at US$49.

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

HOLD

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 HOLD on GenM with unchanged TP of RM4.10 based on SOP valuation.

Source:Hong Leong Investment Bank Research- 2 Jul 2013