News

Genting Bhd (GenT) revealed its plans for a multi-phased opening of the highly anticipated RWLV in Southern Nevada which feature 3,500 gaming positions, 3,000 rooms and dozens of food & beverage outlets.

Construction is expected to begin in 2HFY14 and would take between 24-36 months to complete. Phase 1 would initially consist of a more than 100,000 sq ft floor, a hotel tower, a retail village and a showroom.

The project would incorporate 80-85% of the buildings in the partially built Echelon project and directly create about 8,500 jobs.

In subsequent phase, RWLV will add 3 more hotel towers, a new large-scale attraction, additional gaming space, a smaller and intimate theater, convention center, water park, movie theater and a bowling alley.

Comments

The revealed information is broadly within our expectations and we have already imputed the potential contribution from RWLV into our SOP valuations.

If the development takes a maximum of 36 months (2HFY17), we would revise down our forecast assumptions as we expect RWLV to commence its initial operations in FY16.

We gathered that the officials of the Nevada Gaming Control Board have recommended a gaming license for the group but the matter is still waiting for a second round of scrutiny on 22 May.

Although we remain positive on the chances of GenT obtaining the gaming license, we are maintaining our current assumptions pending further clarity and detailed information to be obtained should the license is awarded.

Financially, we continue to foresee no hurdles for the group to finance the development given its current net cash position and strong cash generating ability.

Risks

1) Regulatory risk; 2) Weaker hold percentage; 3) Pandemic breakouts; 4) Appreciation of RM; 5) Higherthan- expected cannibalisation from Marina Bay Sands (MBS) and Macau casinos; 6) Annual renewal on RWS’s junket license.

Forecasts

Unchanged.

Rating

BUY

Positives – (1) Defensive stock; and (2) New sources of earnings from international markets to drive earnings growth.

Negatives – (1) Highly regulated industry; and (2) Leisure and hospitality’s earnings highly dependable on luck factor and hold percentage.

Valuation

Maintain BUY with unchanged TP of RM12.14  based on SOP valuations.

Source: Hong Leong Investment Bank Research - 9 May 2014